Hold Bajaj Auto; target Rs 1750: KRChoksey

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Hold Bajaj Auto; target Rs 1750: KRChoksey

KRChoksey has recommended hold rating on Bajaj Auto with a target price of Rs 1750, in its January 27, 2012 research report.

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KRChoksey has recommended hold rating on Bajaj Auto with a target price of Rs 1750, in its January 27, 2012 research report.

"Bajaj Auto, net sales up by 20% y-o-y on the back of 13.6% y-o-y volume growth and 5.8% y-o-y realization/unit growth. Exports continued to remain strong with revenue growth of 51% y-o-y to Rs 1710 crores. EBITDA grew by 25% y-o-y to Rs 1061.4 crores. Margins improved by 63 bps y-o-y to 21% on the back of 102 bps y-o-y decline in the raw material cost as a % to sales and improved realizations in the export market. Exceptional loss of Rs58.9 crores on account of valuation loss on derivative hedging instruments. Adj Net profit grew by 25% y-o-y to Rs 834 crores on the back of decline in interest expense and effective tax rate."

"Bajaj auto reported strong revenue growth of 20% y-o-y on the back of 13.6% y-o-y volume growth and 5.8% y-o-y growth in net realizations. Realizations improved on the back of product mix (higher share of premium bikes) and improved export realizations (10% q-o-q on the back of price hike of 3.5% and ~6-7% rupee depreciation). Bajaj auto's market share came down b y~150 bps in Q3 on account of inventory push by competitors and company expects to regain it by Q4FY12. Other operating income declined on the back of lower export incentives. We believe export volumes to remain strong and domestic volumes to remain healthy with launch of new pulsar going forward. Operating profit increased at relatively higher rate of 25% y-o-y on account of improved realizations and moderation in raw material cost (low rubber prices).Consequently margins improved by 63 bps y-o-y and 89 bps q-o-q to 21% for Q3FY12."

"Bajaj auto reported Net profit growth of 19% y-o-y to Rs 795 crores on the back of decline in effective tax rate and interest expense partially offset by lower other income. Adjusting for the forex loss of Rs 58.9 crores on account of forward hedges for export Net profit grew by 25% y-o-y to Rs 834 crores. Despite moderation in the 2-wheeler volumes, we maintain our positive outlook on Bajaj Auto on the back of its superior product portfolio & robust growth in export market. This coupled with launch of new pulsar in Q4FY12 we expect Bajaj Auto to maintain healthy growth trajectory & margins of ~20%. We recommend "HOLD" on the stock arriving at a Price target of Rs.1750 per share implying an upside of 14% from the current levels," says KRChoksey research report.

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To read the full report click on the attachment