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Akash Jain
Bajaj Auto is a strong play in on India’s two wheeler and three wheeler industry and is on the right track to tap the opportunity in a competitive market. We were happy with Bajaj Auto’s Q4FY18 performance which was marginally ahead of street estimates. On a low base and more than doubling of commercial vehicle volumes, the company posted a 38 percent growth in revenues for Q4. While overall volumes were up 33 percent, realisations were up over 4 percent, given the higher three-wheeler mix.
While domestic motorcycle sales were up over 20 percent, growth was a stronger 25 percent on the exports front. Recovery in African markets on the back of rising crude oil prices has helped improve the economy and demand in those countries. Among its motorcycles, CT and Platina models continued to do well during the quarter, while the recently launched Pulsar has shown good traction. The management has not given any guidance for the next year (FY19) owing to volatile macro-economic conditions.
The Pune-based company clocked total sales (both two wheelers and three wheelers) of 1.04 million units during the quarter ended March, 33 percent higher than the 787,468 units sold in the same quarter in 2016-17, according to data from the Society of Indian Automobile Manufacturers.
Domestic sales of two-wheelers grew 20 percent on year to 497,587 units, while two-wheeler exports rose 25 percent over the same period to 358,802 units. The share of two-wheeler exports in Bajaj Auto's total sales declined marginally to 34.3 percent in the quarter, as against 36.5 percent at the end of the corresponding quarter last year.
"We are expecting another 150 bps gain in market share in Q1 over and above the 150 bps we gained during Q4. We would like to end FY19 with a share of 26 percent. We are getting our act nice and firm in the motorcycle segment," S Ravikumar, Head - Business Development, Bajaj Auto
We believe the company led by product innovations, sustained growth in exports, three wheelers doing well and a revival in demand for motorcycles in the domestic market, the company would witness good growth in the near future.
At current market price of Rs 2,777 (Face Value: 10), the sock is valued at a P/E of 19x on FY18 EPS. We expect an upside of 13 percent with a target of Rs 3,135 by FY19 end (19x on FY19 EPS of Rs 165).
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