Motilal Oswal`s research report on Bajaj Auto “Bajaj Auto’s (BJAUT) net sales grew 15.2% YoY (+13.5%) to INR59.63b (est. INR57.04b), led by 4.9% YoY growth (+6.3% QoQ) in realizations, while volumes also grew by 9.8% YoY (+6.8% QoQ) to 10.55m units. RM cost declined by 190bp YoY (-120bp QoQ) to 68.9% (est. 69%) on improved product mix. Employee cost remained flat YoY but declined 60bp QoQ to 3.5%. However, other expenditure increased by 60bp QoQ to 7.8% (adjusted for MTM loss), likely led by higher marketing spends. Higher realizations and better-than-expected margins led to EBITDA being higher by 2.6%, than our estimate, at INR11.3b. Response to the recently-launched Discover 150 series has been encouraging; expects positive trajectory going forward for Discover brand. Outlook for exports (~47% of net sales) continues to remain strong. Company maintains its share gain in the diesel 3W segment.""We raise FY15E/FY16E EPS by 1.4%/3.3% led by an increase in realizations and consequent EBITDA margin expansion. Demand recovery along with stability in competitive intensity would be the key drivers for stock’s performance. BJAUT trades at 19.2x/15.9x FY15E/FY16E EPS respectively. Maintain Buy with a target price of INR2,423 (16x FY16E EPS)," says Motilal Oswal research report.
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