Buy Bajaj Auto; target of Rs 2115: Motilal Oswal

Motilal Oswal's research report on Bajaj Auto

"Bajaj Auto's (BJAUT) net sales declined 4.5 percent YoY to INR47.5b (v/s est INR49.9b) led by volume decline of 3.5 percent YoY (-13 percent QoQ) to 9.8m units (v/s est 1.05m units) and realizations growth of 2.1 percent YoY (+0.8 percent) to INR48,372 (v/s est INR47,588). EBITDA margin declined by 80bp YoY (-110bp QoQ) to 17.6 percent driven by higher other expenditure (60bp YoY, 140bp QoQ). PAT grew 1 percent YoY (-6.5 percent QoQ) to INR7.7b (v/s est INR7.4b) due to higher other income and lower tax." "We expect two-wheeler volume recovery to be back-ended in FY14, with near term volumes expected to remain weak. This coupled with HMSI's continued expansion on capacity, dealer network and product portfolio would result in sustained pressure on the domestic players. We believe BJAUT's business model as superior and expect it to trade at a premium to HMCL given its well diversified product portfolio, significant headstart in exports, well positioned global strategic alliances, premium profitability and consistent step-up in dividends. While valuations are reasonable, demand recovery along with stability in competitive intensity would be the key driver for the stock performance. The stock is trading at 15.1x/13.0x FY14E/FY15E EPS respectively. Maintain Buy with target price of INR2,115 (15x FY15 EPS)," says Motilal Oswal 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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