Bajaj Auto: Better export realization boosts profitability:: Kotak Securities

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Better export realization boosts profitability. Bajaj Auto reported a net profit of
`8.6 bn (-5% yoy), which was 22% above expectations. The positive surprise was led by
– (1) 4% higher-than-expected revenues driven by improvement in export average
selling prices due to improvement in product mix and (2) lower-than-expected other
expenses. We expect exports to report a double-digit growth in FY2016, despite the
slowdown in the Nigerian economy, led by entry into new markets. Bajaj Auto still
needs to arrest the decline in the domestic market share in the two-wheeler segment.
We maintain our ADD rating with an unchanged target price of `2,650.

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Buy Bajaj Auto at Rs 2404.25 and add on dips to Rs 2170-Rs 2240 for a Target of Rs 2638 in 1 quarter :: HDFC Securities

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Bajaj Auto Ltd.|Q3FY15| EBITDA margin and PAT above expectation | Maintain BUY rating on the stock with target price of Rs. 2,840. :: IndiaNivesh

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Bajaj Auto - Export Headwinds; Result Update Q3FY15 :: Edelweiss, report

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Export performance aids beat! • Bajaj Auto :: ICICI Securities, report

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Bajaj Auto (3QFY15) : Decent quarter but headwinds persist. Maintain NEUTRAL :: HDFC Securities

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Short Bajaj Auto between Rs 2365 and Rs 2400:: HDFC Securities

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Bajaj Auto - Sharpening Focus; Company Update::Edelweiss report link

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Bajaj Auto: Analyst meet takeaways :: Kotak Sec, report link

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New strategy execution & success key! Bajaj Auto :: ::ICICI Securities, link

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Bajaj Auto Ltd. | Q2FY15 Concall Update | EBITDA margin and adjusted PAT above expectation | Maintain BUY rating on the stock with target price of Rs. 2,556:: IndiaNivesh

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Bajaj Auto Ltd.|Q2FY15 First Cut Analysis | EBITDA margin and adjusted PAT above expectation | Maintain BUY rating on the stock with target price of Rs. 2,556 :: IndiaNivesh

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Bajaj Auto Valuations attractive; Buy :: Anand Rathi

Bajaj Auto
Valuations attractive; Buy
Key takeaways
Weak demand. In 3QFY14, demand for Bajaj Auto’s motorcycles remained
weak owing to intense competition. During the quarter, its total sales were
down 11.9% yoy; motorcycles declined 10% and three wheelers 25.1%, yoy.
We expect stability in volumes hereon, with the worst part of volume decline
likely to be over. We expect better exports in CY14, along with arresting of
the slide in market share.
Stable EBITDA margin. We expect a 2.1% dip in income, to `53bn, but a
17.7% yoy improvement in EBITDA to `11.9bn. Our EBITDA margin
expectation is 22.5% (380bps higher yoy, stable qoq). We expect the
EBITDA per vehicle to grow 33.6% yoy, but decline 1.6% qoq. The
contribution per vehicle is expected to be higher 32.1% yoy. Our tax-rate
expectation is 31%, which would be 80bps higher yoy. We also expect nonoperating income to be lower 10% yoy. This would lead to a relatively lower
11.8% yoy growth in the adjusted profit, to `9.2bn, with a 17.3% net profit
margin (up 220bps yoy). The adjusted profit per vehicle is expected to be
26.8% higher yoy.
Our take. For 4QFY14, the demand outlook remains unexciting (residual
growth estimate 3.5%). Dec ‘13 performance indicates that motorcycle market
share loss persisted (423bps lower in Apr-Nov ’13). However, we believe that
the worse performance is now factored in the estimates and stock price. The
key positives are sustained better export realisations yoy and a higher share of
exports in the product mix. Recovery in three-wheeler sales ahead would be
an added positive. We have a Buy recommendation on the stock. At our price
target, the stock would trade at PE of 15.8x FY15e. The stock is also trading
lower to its past three-year average EV/EBITDA multiple. Risks. Later-than
expected demand recovery, problems in export destinations, unfavourable
forex movements, and higher commodity prices.

Bajaj Auto : Riding on the Rupee :: Citi Research

Bajaj Auto (BAJA.BO)
Alert: Riding on the Rupee
 1QFY14 Con Call Takeaways: Outlook is fairly positive for FY14 — given a) the
current weakness in the INR, and b) a pick-up in domestic 3W volumes. Mgmt
noted that export hedges are in place for the remaining 3Qs of FY14 for ~740mn
USD of exports. 2Q hedges should yield a realization of ~Rs58.5/US$, vs Rs55.56
in 1Q. Our FY14/15 estimates remain unchanged, given that currency will buoy
margins and offset weak volumes.
 Domestic 3W outlook is also healthy — as fresh permits are opening up -
~20,000 in Hyderabad, another 30k-35k in Maharashtra. Overall, the 3W run-rate
from Aug should stabilize at ~45k units / month – implying around ~520k units for
FY14.
 Export volume weakness continues — For FY14, mgmt reckons that overall 2W
export volume growth will be ~5% (10-12% earlier). Key end markets like Nigeria
remain weak (volumes down ~12% YoY for Bajaj, -22% for industry). Mgmt is
seeding new markets like Kenya, Ivory Coast and Uganda. In the long term, the
association with Kawasaki in Indonesia and possibly markets in Lat Am should yield
benefits too (citing Philippines as precedence, wherein market share for the
Kawasaki/Bajaj combine rose to 45% from 10% when Kawasaki was on its own).
Mgmt might contemplate taking actions to grow export markets, but doesn’t see the
need to cut prices as of now, to stimulate market growth.
 Domestic 2W outlook remains challenged, at least for 1H — Mgmt noted
industry retail volumes declined ~11% in June and expects volumes to decline 5%
in July. A recovery, if any, will be in 2H post monsoons. Bajaj will launch around six
variants under the Discover brand, with some of the focus being on the Economy
100cc space, given the down-trading that’s occurring due to fuel costs. Inventory
remains at around 5 weeks for the Discover; the Pulsar is lower at around 3 weeks.
Maintain Neutral. For detailed analysis of 1QFY14 results, see our note dated 19
July 2013 Bajaj Auto (BAJA.BO) - 1QFY14: Exports Offset Domestic Weakness

Goldman Sachs, maintain our Buy rating on Bajaj Auto

Bajaj (BJAUT IN, Buy, off Conviction List)
What happened
We maintain our Buy rating on Bajaj Auto and continue to remain positive on
company fundamentals. However, we remove the stock from our conviction
list and replace it with Tata Motors where we see higher relative upside on
account of the strong product cycle at JLR (currently at its inflection point).
Since we placed Bajaj Auto on our conviction list on Feb 15 2012, the stock is
up 14.7% vs. Sensex/BSE Auto Index up 8.8%/10.3% respectively.
Current view
Structurally, we remain positive on the global 2-wheeler space, due to
relatively consolidated nature of the industry, and growing base of consumers
at the bottom of the global economic pyramid. (See India Auto:
Deconstructing the 2-wheeler value creation engine; Buy Bajaj Auto, Feb. 15
2012. However, we cut our FY14E-16E EPS estimates by 9% to 14% on
account of the weak domestic 2-wheeler demand outlook given the backdrop
of continued weak consumer sentiment due to persistently high inflation
(especially CPI) and interest rates in the economy. We now see flattish 2-
wheeler domestic demand growth forecast for FY14 vs. prior assumptions of
11% growth with pick up in FY15/16 to 14%/12%.
We continue to maintain our positive stance on Bajaj Auto and maintain our
Buy rating as we still prefer the relatively more defensive 2-wheeler segment
when compared to rate sensitive pockets like passenger cars and trucks. Bajaj
Auto continues to deliver top quartile CROCI and industry leading EBITDA
margins on account of: 1) premium segment exposure in 2Ws, 2) first mover
advantage in exports, 3) FX benefits on account of INR depreciation as 33% of
its sales (in FY13) is derived from exports, and 4) exposure to higher margin
3-wheeler segment expected to get boost in the near term especially in
domestic markets with sanction of new permits in Hyderabad (~20K) and
Maharashtra (~30K). The stock is also on the GS SUSTAIN Focus List. Our cut
to EPS estimates are driven by sluggish domestic 2W demand but we still
remain positive on export growth outlook both for 2Ws and 3Ws. We raise
our 12-month P/E-based target price by 6% to Rs2,390 from Rs2,260 as we roll
forward to FY15E based target price. We now assign a higher target multiple
of 16.5X vs. prior 16X due to improved export growth and margin outlook as
well as relatively defensive nature of Bajaj Auto’s earnings, in our view.
Risks: 1) Longer-than-expected resolution of ongoing labor strike at Chakan
plant and any potential spill-over to other plants leading to loss of retail sales
and market share, 2) better-than-expected success of competitors such as
Honda and Yamaha, 3) higher raw material costs, 4) lower demand in India or
overseas markets, and 5) lower-than-expected consumer confidence.

Bajaj Auto Strong quarter, but challenging outlook Standard Chartered Research,

Bajaj Auto
Strong quarter, but challenging outlook
 Bajaj Auto‟s (BAL) 1QFY14 earnings at INR 8.1bn were
ahead of our estimates, led by better-than-expected
margins.
 Operating performance was aided by favourable currency
movement in 1QFY14.
 Favourable currency hedges are likely to further improve
margins in subsequent quarters, in our view.
 However, the volume outlook continues to remain
uncertain in both domestic and export markets.
 The stock appears fairly priced at current valuations. We
maintain our In-Line rating with a revised price target of
INR 1,952 (versus INR 1,910 earlier).

Bajaj Auto Q1 margin beat, but clouded demand outlook „: BofA Merrill Lynch,

Bajaj Auto
Q1 margin beat, but clouded
demand outlook
„Raise forecasts & PO, Maintain Undperform
Q1 profit, at Rs 7.4bn, was slightly ahead of expectations, despite lower financial
income. This was led by a 2% beat in realizations, reflected in a ~6% surprise in
EBITDA, at Rs 9.07bn (up 4% yoy). We raise our profit forecasts by 3%-4% over
FY14-15E to factor in USD/INR at Rs 58 (vs. Rs 55 earlier). Our PO is similarly
raised to 1,915. However, we retain our Underperform rating and prefer Hero
(HRHDF, Rs1772.9, C-1-7) in this space. Hero trades at a 19% P/E discount on
our FY15E estimates and a 9% P/E discount on consensus expectations, with
similar growth trajectories.
Margins surprise, could sustain
Q1 EBITDA margins increased 55bps yoy, at 18.5%, higher than our estimate of
17.6%, solely due to better mix (three wheeler exports up 44%) and higher
realizations. Although USD:INR continues to be favourable, we raise margins by
just 20-30bps/year, as (1) our current volume forecasts already assume a shift in
mix to pricier segments, i.e., bikes, three wheelers, and (2) export of three
wheelers should normalize (up 44% in Q1), thereby restricting ASP increases.
Demand outlook muted
Aggregate Q1 volumes declined 9% yoy, both domestic and export. We expect
the economic and competitive environment to remain challenging. Our volume
forecast is tweaked to 4.4mn in FY14E (+4% yoy) and 4.9mn in FY15E (+10%),
which imputes recovery across segments. This is driven by (1) bike launches,
mostly in the commuter segment, (2) three wheeler permits in Hyderabad and
Maharashtra, (3) new export destinations, leveraging on Kawasaki’s distribution
network, and (4) back-ended economic recovery. Although our forecasts seem
conservative, we note the company fell well short of indicative guidance last year

Goldman Sachs, Asia: Conviction List Update - Tata Motors, Bajaj

Asia: Conviction List Update
Equity Research
Our best stock ideas in Asia
Add Trade Me, TMSC and Tata Motors; Remove Bajaj Auto
Trade Me: On July 23, we added Neutral rated Trade Me to our ANZ
Conviction List (ANZ CL) given the company’s structural migration to
online media from print classified businesses; solid 2H13 growth; and
undemanding valuations.
TMSC: On July 24, we added the stock to our Asia ex-Japan Conviction
List (AEJ CL) as we believe its recent share price correction is overdone.
We expect higher capex, new launches, and a cyclical recovery to underpin
share price performance.
Tata Motors: On July 29, we added the stock to our AEJ CL on the back of
a strong upcoming multi-year product cycle, which could drive solid
earnings expansion.
Bajaj Auto: On July 29, we removed Bajaj Auto from the AEJ CL as we
replaced the stock with Tata Motors.
CL performance
For the period between July 22 and July 29, AEJ CL generated -0.2% alpha
hedged with MSCI AEJ and currently consists of 44 stocks; the Japan CL
generated +1.8% alpha hedged with TOPIX and consists of 16 stocks; the
ANZ CL generated -0.4% alpha hedged with ASX200 Accumulation Index
and consists of 14 stocks.
Director of Research (DOR) Asia Focus List
For the period between July 22 and July 29, Focus List alpha hedged with
the MSCI Asia Pacific index was +2.0% (ytd: -13.8%). There were no
changes during the periods.
Our Focus List consists of the following 8 Buy-rated CL stocks:
AIA Group, Anhui Conch (H), China Eastern Airlines (H), HCL Technologies,
Hyundai Development, Lonking Holdings, Ping An (A), and Sumitomo
Mitsui Financial Group.

Bajaj Auto :FY13 annual report: Key takeaways: Credit Suisse

 Bajaj’s FCF declined from Rs29 bn in FY12 to Rs17 bn in FY13. A
large part of the decline can be attributed to higher capex (Rs3.5
bn out of which Rs2.1 bn was spent on aircraft), a delay in VAT
refunds (Rs3 bn) and higher receivable days (Rs3 bn).
 Losses at Bajaj’s Indonesian subsidiary widened from Rs120 mn to
Rs240 mn. It expects a pick-up in 2H FY14 once its products will be
sold through Kawasaki network. KTM benefitted from the smaller
made-in-India products and saw healthy >30% volume growth.
 FY13 also witnessed increases in both advertising (20 bp) and
R&D (40 bp) spends from Bajaj. Advertising spends in India
increased 40% in FY13 and we expect them to increase further
with new launches and rising competitive intensity.
 A region-wise break-up of Bajaj’s exports confirms what we have
been saying about strong growth in Africa, steady growth in Latin
America and a decline in Asia. While Bajaj started FY13 with an
optimistic outlook reflected in its capacity expansion at Waluj and
amount of hedges (US$1.4 bn), Bajaj’s lower hedges for FY14
(US$0.9 bn) reflect the uncertainty prevalent in export markets.

Technicals: Bajaj Auto, Wockhardt, Coal India, Shree Renuka Sugars, Swaraj Engines, Oracle Financial :: Business Line