Jan 19, 2013 12:28 PM IST | Source:

Hold Bajaj Auto: Ventura

Ventura has recommended hold rating on Bajaj Auto in its January 17, 2013 research report.

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Ventura has recommended hold rating on Bajaj Auto in its January 17, 2013 research report.
“Bajaj Auto management expects the volume growth to remain subdued over the coming months for the industry as a whole. However, the company is expected to gain market share (~32% in Q3FY13) primarily led by the success of Discover 125 ST and pan India launch of Discover 100T. However volume growth will be dependent on export performance which is experiencing slow growth. A slight moderation in input costs can aid operating margin in FY13 and FY14. At CMP of Rs 2,052, the stock is trading at 18.7x and 15.8x its estimated earnings for FY13 and FY14 and we recommend a HOLD on the stock.”
“Bajaj Auto Ltd’s (BAL) net sales grew by 9.7% YoY to Rs 5,307.2 crore on the back of volume growth (+4.9% YoY) and marginal price hikes. The motorcycle volumes (domestic+ export) grew by 4% YoY to 986,263 units and three wheeler volumes rose by 10% YoY to 141,478 units. EBITDA margins declined by 100 bps YoY (18.7% v/s 19.7%), however it witnessed a growth of 30 bps (18.4% in Q2FY13) on QoQ basis. Operating profits rose by 2.8% YoY and stood at Rs 1,011.8 crore. PAT stood at Rs 818.7 crore as compared to Rs 795.2 crore in Q3FY13 (+3% YoY; +10.5% QoQ). On the international front, the company has witnessed flat to negative growth in all the markets except South Africa (12% growth in 9MFY13). However, the management is confident of attaining at least 10% volume growth in the export market. The company expects 15-18% volume growth in exports (in next 4-5 years) driven by leveraging Kawasaki association to further penetrate South East Asian markets (Indonesia followed by other markets in FY15), entering untapped markets like Brazil and leveraging KTM association.”
“The launch of the RE60 quadri-cycle can be expected by Q2FY14. In case the approvals for the domestic market are still not in place, the company will start with exports to Sri Lanka. New launch and product upgrade pipeline for FY14 and FY15 remain strong, although the management did not disclose its details. Initial response to the newly launched Discover 100T has been good and the management expects pan-India rollout by February-end. Cash and equivalents stood at Rs 5370 crore v/s Rs 4520 crore in Q2FY13 and there are no immediate plans of deploying cash,” says Ventura research report.

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