Buy Bajaj Auto; target of Rs 1920: Emkay

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Buy Bajaj Auto; target of Rs 1920: Emkay

Emkay Global Financial Services is bullish on Bajaj Auto and has recommended buy rating on the stock with a target of Rs 1920 in its January 20, 2012 research report.

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RELATED NEWS Hold Exide Industries; target of Rs 138: BP Equities Accumulate Godrej Consumer; target Rs 465: Dolat Capital Buy Larsen and Toubro; target Rs 1466: Angel Broking ALSO READ See previous views by Emkay Global Financial Services See what other Experts & Brokerages are saying about Bajaj Auto See messages about Bajaj Auto Bajaj Auto BSE | NSE 31/05/12 Are Mutual Funds betting on Bajaj Auto?

Emkay Global Financial Services is bullish on Bajaj Auto and has recommended buy rating on the stock with a target of Rs 1920 in its January 20, 2012 research report.

"Bajaj Auto, net sales at Rs 50.6bn (21% YoY, -4% QoQ) was marginally above our est. of Rs 50bn. Average selling price (ASP) was at Rs 45,004 (6% YoY, 4% QoQ) marginally higher than our est. Significant increase was seen in export ASP's at Rs 44,892 (~18%YoY/ 10% QoQ). ASPs benefited from favorable currency, price hikes of ~3.5% QoQ taken in export markets and ~1% QoQ in domestic market taken during the quarter."

"EBITDA was at Rs 10.6bn ~2% above our est. of Rs 10.3bn. This was largely led by lower other expenses and marginally better topline. Other expenses came at Rs 3bn vs our est. of Rs 3.1bn. RM/sales was in line with our est. at ~70.4%. Staff costs at Rs 1.3 bn (~2.5% of sales) was also in line with our estimate. Adjusted net profits at Rs 8.4 bn (~4% above est.) benefited from higher other income and lower tax rate. Other income came at Rs 908 mn vs our est. of Rs 819mn. Effective tax rate at ~25.1% was lower than our est. of 25.7%. However, depreciation expense at Rs 321 mn was higher than our est. of Rs 287mn. Company has received an NCCD claim of Rs 778 mn from govt. for sales from Pantnagar which is under dispute. Hence, no provision has been made for the same."

"At Rs1,558 the stock trades at PER of 14.1x/12.6x and EV/EBIDTA of 9.8x/7.9x our FY12/13 estimates respectively. Given the high cash flow generation and strong ROCE of above >60%, we find stock attractive. However, given the fact that exports will be the key driver of performance in the near term, we are lowering our target multiple by 10% to 15.5x/10.2x PER / EV - EBIDTA. We retain our BUY rating on the stock but lower our TP to Rs 1920," says Emkay Global Financial Services research report.  

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