Buy Bajaj Auto; target Rs 1,755: Angel Broking

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Buy Bajaj Auto; target Rs 1,755: Angel Broking

Angel Broking is bullish on Bajaj Auto (BJAUT) and has recommended buy rating on the stock with a target price of Rs 1,755 in its January 19, 2012 research report.

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Angel Broking is bullish on Bajaj Auto (BJAUT) and has recommended buy rating on the stock with a target price of Rs 1,755 in its January 19, 2012 research report.

"Bajaj Auto (BJAUT) posted strong results for 3QFY2012, largely in-line with our estimates, driven by robust performance on the exports front. Exports revenue grew by 51.1% yoy (down 1.3% qoq), benefitting from price increases and favorable currency movement leading to better-than-expected EBITDA margin at 21%. We broadly retain our revenue and EPS estimates for FY2012/13."

"BJAUT reported strong 21.2% yoy (down 3.9% qoq) growth in net sales to Rs 5,063cr, driven primarily by 51.1% yoy (down 1.3% qoq) growth in exports revenue. While export volumes witnessed robust 28.4% yoy (down 10.1% qoq) growth, export realization grew strongly by 17.6% yoy (9.8% qoq), led by price increases and favorable currency movement. Domestic performance, however, was muted as volume and realization posted moderate growth of 6.8% (down 6.2% qoq) and 1.2% yoy, respectively, leading to domestic revenue growth of 8.1% yoy (down 5.5% mom). EBITDA margin surprised positively as it touched 21% (up 63bp yoy and 89bp qoq) on account of easing of raw-material prices and favorable currency movement on the exports front. Thus, net profit posted strong 19.2% yoy (9.6% qoq) growth to Rs 795cr. However, bottom-line growth, to some extent, was restricted as BJAUT reported mark-to-market (MTM) loss of Rs 59cr relating to hedging contracts."

"We continue to prefer BJAUT over Hero MotoCorp in the two-wheeler space, owing to its diversified business model, healthy revenue and earnings visibility and reasonable valuations. Post the recent fall in the stock price, BJAUT is trading at attractive valuations of 12.5x FY2013E earnings. We recommend Buy on the stock with a target price of Rs 1,755, valuing it at 15x FY2013E earnings," says Angel Broking research report.

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To read the full report click on the attachment