Accumulate Bajaj Auto; target of Rs 2056: Angel Broking
Angel Broking is bullish on Bajaj Auto and has recommended accumulate rating on the stock with a price target of Rs 2056 in its May 17, 2013 research report.
Angel Broking`s research report on Bajaj Auto
“Bajaj Auto (BJAUT) reported lower-than-expected operating performance for 4QFY2013, nevertheless, the bottom-line was slightly ahead of our estimates driven by higher other income and lower tax-rate. Going ahead, BJAUT is planning to launch six new variants of Discover in FY2014, four of which would be in the price range of Rs40,000-Rs50,000. Further, the company also intends to revamp its entire three wheeler portfolio in FY2014. We believe that the aggressive product launch pipeline coupled with the revival in demand in the domestic and exports markets will enable BJAUT to register a healthy volume CAGR of ~10 percent over FY2013-15E. Nevertheless, we expect EBITDA margins to remain under pressure as the benefits of favorable rates on forex hedges will be negated by the changing volume-mix in favor of lower margin products. We broadly retain our revenue and earnings estimates for the company for FY2014/15. We maintain our Accumulate rating on the stock.” “For 4QFY2013, the top-line posted an in-line growth of 2 percent yoy (down 12.3 percent yoy) to Rs4,746cr, following a 3.5 percent yoy (13 percent qoq) drop in volumes to 981,242 units. The net average realization, however, improved strongly by 6.8 percent yoy (0.7 percent qoq) led by favorable foreign exchange rate on the exports front and also due to price hike in the export markets (effective November 2012) to pass on the impact of reduction in export incentives. The EBITDA margin declined 217bp yoy (107bp qoq) to 17.6 percent, below our expectations of 18.6 percent, mainly due to adverse product-mix (higher share of less than 125cc motorcycles in the product-mix) and increase in other expenditure. The adjusted net profit registered a marginal growth of 1.9 percent yoy (down 6.5 percent qoq) to Rs766cr. However, it was slightly ahead of our expectations driven by higher other income (74.6 percent yoy and 19.9 percent qoq) and lower tax-rate (at 25.9 percent as against 30.2 percent in 3QFY2013).” “At Rs1,834, BJAUT is trading at 13.4x FY2015E earnings. We maintain our Accumulate rating on the stock with a target price of Rs 2,056, valuing the company at 15x FY2015E earnings,” says Angel Broking research report. Disclaimer: 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. 
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