Accumulate Bajaj Auto; target Rs 1631: P Lilladher
Prabhudas Lilladher is bullish on Bajaj Auto (BJA) and has recommended accumulate rating on the stock with a target price of Rs 1631 in its July 19, 2012 research report.
July 21, 2012 / 16:30 IST
Prabhudas Lilladher is bullish on Bajaj Auto (BJA) and has recommended accumulate rating on the stock with a target price of Rs 1631 in its July 19, 2012 research report.
"Bajaj Auto (BJA) reported 2.9% YoY improvement in its top-line at Rs49.6bn, mainly on account of 4.2% YoY realization growth. On a sequential basis, the top-line grew by 5.4%, mainly on account of 6.0% QoQ growth in volumes. Realisations in domestic market declined by 4.0% QoQ, whereas, on the exports front, realisations improved by 4.6%. Despite the slowdown, BJA was able to maintain its margins at 19.4% (only 30bps decline YoY), mainly on account of 5.9% YoY growth in export realisations (Rs49.8/$ vs Rs46.7/$). However, on account of lower 3-wheeler volumes (lower by 350bps QoQ to 8.9% of overall volumes), EBITDA margins declined by 130bps QoQ to 19.4%, with EBITDA being flat at Rs9.6bn. PAT for the quarter grew by 1.0% at Rs7.2bn in line with the EBITDA growth.""BJA lost sales of 25,000 units in this quarter on account of higher import duty in Sri Lanka and political unrest in Egypt. The company, along with its distributors, has undertaken proactive measures like rationalising the end user cost of vehicles in Sri Lanka (price cut of 10-15% to be borne by company and the distributor) and expects normalised volumes of ~20K to Sri Lanka, starting Q3FY13. For FY14E, the company is finalising its cover with a base rate of Rs54-55/$, thereby, benefiting ~7-8% in terms of realisation in FY14E. The management expects EBITDA margins to improve in the current quarter on account of recent price hikes in the domestic motorcycle market, improved three-wheeler volumes and the launch of new products in the high margin segment. (125cc Discover and Pulsar 200 NS).""With ~45% of the revenues for BJA coming from relatively stable export and three-wheeler business, we believe 19%+ EBITDA level margins are sustainable. In our view, margins are likely to improve from here on (mainly H2FY13), led by better product mix in favour of three-wheelers and exports. At the CMP, the stock is trading at 14.2x FY13E EPS and 12.1x FY14E EPS, which in our view, is attractive. Maintain ‘Accumulate’ with a TP of Rs1,631 based on 13x FY14E EPS in line with its average historical multiple," says Prabhudas Lilladher research report.Non-Institutions holding more than 90% in Indian cosDisclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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