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Bajaj Auto Ltd. | Q1FY14 First Cut Analysis




IndiaNivesh Securities Pvt Ltd


19 Jul 2013





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Bajaj Auto Ltd. | Q1FY14 First Cut Analysis In line with street expectation Bajaj Auto reported its Q1 FY14 numbers (Standalone) in line with street expectation. Revenue increased by 2% Y-o-Y and 3.4 % Q-o-Q to Rs. 48.08 bn (in line consensus of Rs. 48.30 bn) on the back of better realization in export due to weaker Rupee. Average net realization improved by 4% q-o-q to Rs 49,105 led by higher export realizations (USD/INR hedged at above 54 levels v/s INR49.5/USD in FY13) and price hike of Rs. 300-500/unit, effective from April 2013. Despite 13% de growth in export volume, revenue from international market increased by 10% YoY in Rupee terms (down 3% in dollar terms). The company witnessed de-growth in volume led by poor performance from two wheeler sales. Two wheelers volume decreased 12.5% YoY (flat QoQ) while three wheeler volume increased 23.6% YoY (down 2% QoQ). EBITDA margin improved 36 bps Y-o-Y and 87 bps QoQ to 18.9% due to softening in raw material prices and favorable exchange rate. During the quarter the company incurred notional forex loss of Rs. 960 mn on option contract, which has been shown under the head of other expenses. Reported PAT stood at Rs. 7.37 bn in line consensus estimate of Rs. 7.40 bn. The strike at the company's facility in Chakan near Pune continues as the management and the union failed to reach an agreement over wage hikes and the issuing of stocks to workers at a discounted rate. Bajaj Auto has asked the industrial court to declare the strike illegal. The hearing of the case is fixed for 22nd July 2013. Valuation: At CMP of Rs 1955, the stock is trading at PE of 15.85xs of FY14E EPS which is lower than its mean of 17 times. Bajaj Auto’s return ratios and cash flow generation remain one of the best in the industry. However, considering moderation in the 2 wheelers volumes due to macro headwinds lower exports growth visibility along with impact on margin due to duty hike in Sri Lanka, we maintain our neutral view on the stock. We will come out with detailed analysis after the conference call scheduled for 22nd July, 2013.

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