Hold Bajaj Auto: Ventura
Ventura has recommended hold rating on Bajaj Auto in its May 20, 2013 research report. The research firm expects the demand to remain subdued in the near term, new launches in the Discover/Pulsar family can lead to mild volume growth in FY14.
Ventura`s research report on Bajaj Auto
“Bajaj Auto’s (BAL) net sales grew slightly by 3 percent YoY to Rs 4651.1 crore backed by the volume de-growth (-4 percent YoY). The motorcycle volumes (domestic+ export) de-grew by 4 percent YoY to 859,695 units, while three wheeler volumes rose marginally by 1 percent YoY to 121,547 units. Over the same period, EBITDA margins declined to 17.6 percent v/s 19.8 percent. PAT stood at Rs 765.8 crore as compared to Rs 772 crore in Q4FY13. In Q4FY13, the company’s domestic sales for diesel carriers grew by 25 percent as against industry growth of 9 percent; resulting in an increase in segment market share to 31 percent; a gain of 400 bps. Sale of domestic three-wheelers grew by ~11 percent as against the industry growth of less than 5 percent.”“On the international front, the company witnessed a growth of 4 percent to Rs 6713 crore as against Rs 6450 crore. KTM volumes have been ~20,000 units v/s ~18,000 units last year in export markets. The management expects ~25,000 units sales for FY14E. Overall, the management expects the export markets to grow 10-12 percent in dollar terms with growth coming from Indonesia, Latin America, Egypt and Africa while Sri Lanka is expected to not worsen from this level. In line to retain its market share, Baja Auto has planned to launch six new products in the Discover/Pulsar family (125cc), along with the quadricycle “RE60” in Q4FY14. To drive sales further, the company plans to add 30 more dealers in its close to 650 dealers list. During the quarter, the company did not offer any discounts and has hiked its prices by Rs 500/1000 per unit in the domestic market. Cash and equivalents stood at Rs 566.51 crore v/s Rs 1659.84 crore in Q3FY13 and there are no immediate plans of deploying cash.”“Although, we expect the demand to remain subdued in the near term, new launches in the Discover/Pulsar family can lead to mild volume growth in FY14. Further, the management is confident of export markets and expects it to grow 10-12 percent in dollar terms with growth coming from Indonesia, Latin America, Egypt and Africa while Sri Lanka is expected to not worsen from current level. A slight moderation in input costs can aid operating margin in FY14-15. However the big game changer would be the launch of the quadric cycle. At a CMP of Rs. 1869 the stock is trading at 14.9x and 13.1x its estimated earnings for FY14 and FY15 and we recommend a HOLD on the stock,” says Ventura 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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