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Bajaj Auto Ltd. | Q3FY14 First Cut Analysis | In line with street expectation




IndiaNivesh Securities Pvt Ltd


16 Jan 2014





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Bajaj Auto Ltd. | Q3FY14 First Cut Analysis In line with street expectation Bajaj auto reported its Q3 FY14 PAT number (Standalone) in line with street expectation. Reported PAT increased by 10% Y-o-Y and 8.1% Q-o-Q to Rs 9.04 bn (above consensus of Rs 8.7 bn) led by higher proportion of export sales (volume contribution 43% of total sales in Q3FY14 vs. 33% in Q3FY13 and 42% in Q2FY14) coupled with favorable exchange rate (USD/INR realization at 61 levels v/s INR 60.9 in Q2FY14 and 49.5 in FY13) and forex gain of Rs.950 mn. Revenue decreased by 5.3% Y-o-Y and 0.7 % Q-o-Q to Rs. 50.24 bn (below consensus of Rs. 53.34 bn) due to lower Average realization. Average net realization down by 4% q-o-q to Rs 50567 led by lower contribution from three wheeler sales (volume contribution 11% of total sales in Q3FY14 vs. 13% in Q3FY13 and 12% in Q2FY14). Three wheeler sales decreased 25% YoY and 5% QoQ 1, 06,019 vehicles. Reported EBITDA margin improved significantly 353 bps Y-o-Y and 23 bps QoQ to 22.6% to Rs. 11.35 bn led by higher proportion of export sales, lower other expenditure and favorable exchange rate. The company reported forex gain of Rs. 950 mn in Q3FY14 which is included in other expenses. After adjusting forex gain EBITDA comes at 10.4 bn and margin comes at 20.7% vs consensus of 21%. Per unit export realization improved by 10% YoY to Rs. 50248. Valuation: Rising exports and better realization due to falling rupee helped Bajaj Auto to report a decent quarter performance despite a slowdown in the domestic market. Further, Bajaj Auto's return ratios and cash flow generation remain one of the best in the industry. Further the company is already hedging its exports at favourable rates (USD/INR realization was at 61 levels in Q3FY14 v/s 49.5 in FY13 and company expect H2FY14 realization would be ~ 60 level), margin expected to improve in FY14 led by higher export realizations and price hike in the month of October 2013. We are also hopeful of recovering its market share in the two-wheeler segment with new launches (KTM sports mode, Bajaj Pulsar 200 Ns Abs) lined up. At CMP of Rs 1,906, the stock is trading at PE of 13.7x of FY15E EPS which is lower its mean of 17 times. Considering revival in exports volume and expected demand pick up from rural area, we maintain buy rating on stock with target price of Rs. 2,256. We will come out with detailed analysis after the conference call scheduled for 17th January, 2014.

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