Exports to offset local slowdown for Bajaj Auto: Analysts

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Exports to offset local slowdown for Bajaj Auto: Analysts

Analysts remain bullish on Bajaj Auto, India's second largest two-wheeler maker by sales, saying strong growth in exports, and higher realizations there will offset slowdown in the domestic market.

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Analysts remain bullish on Bajaj Auto , India's second largest two-wheeler maker by sales, saying strong growth in exports, and higher realizations there will offset slowdown in the domestic market.

Pune-based Bajaj Auto reported a lower-than-expected 19% growth in net profit for the third quarter due to one-time losses on foreign exchange hedging. Net sales in the three-month period rose 21.6% from a year ago. However, higher realizations from exports led to EBITDA margin expanding to 21% in October-December.

Here's what some analysts feel on the company's earnings performance in the third quarter and the outlook going ahead:

Brics Securities: We like Bajaj Auto's strong positioning in premium motorcycles, high margins (around 20% and highest in the industry), rising exports (37% of total sales), and high return ratios (we 41% ROCE in fiscal 2013). Rating: Buy. Target: Rs 1,718.

Emkay: Momentum in exports to continue in FY13, outlook for domestic two wheelers subdued. We lower our volume estimates by 3% and 5% in FY12 and FY13 to 4.4 million and 4.9 million units as we factor in lower growth for domestic market. Rating: Buy. Target: Rs 1,920.

LKP Securities: With domestic volume growing by just 7% year-to-date due to demand softness and competition, Bajaj Auto reported a quarter-on-quarter decline of 4% in topline...With robust margin profile and opportunities in the export markets, we prefer this stock over its peers. However, from current market price, we believe there is a limited upside for the stock. Rating: Neutral. Target: Rs 1,645.

Nomura: We expect Bajaj Auto to continue to report strong export volumes and profitability. However, domestic volumes can come under pressure due to a potential industry slowdown and increased competition from Honda. Rating: Neutral. Target: Rs 1,588.

Prabhudas Lilladher: With slowdown evident in the two-wheeler segment, we are cautious on the domestic two-wheeler growth. However, with 50% of the revenues for Bajaj Auto coming from relatively stable export and three-wheeler business, we remain positive on the stock. Rating: Accumulate. Target: Rs 1,581.

Bajaj Auto shares closed up 6.4% at Rs 1,561.35 on NSE on Friday.