Bajaj Auto Ltd. share price target

We are initiating coverage on Bajaj Auto with a HOLD rating as significant headwinds of COVID19 and low crude oil prices will lead to near term pressure on BJAUT but we expectit to outpace industry growth in the long run led by 1) Innovation in product with a dual focus on entry and premium segment.

Delay in payments by OEMs, coupled with higher fixed cost would increase the working capital days for auto-ancillary companies, which may impact the small and mid-cap companies the most. Q4FY20 Result Expectation: We have seen 10 days lockdown in March20 and muted demand leading to lower volumes and higher discounting. We expect all the OEM's to report decline in revenue on YoY and QoQ. Amongst OEM's like Ashok Leyland (AL) (-64%), TVS motors (TVSL) (-29%) and Hero MotCorp (HMCL) (-25%) to report decline in revenue on YoY. We expect highest YoY EBITDA de-growth for AL (84%),...

Bajaj Auto (BJAUT) Q3FY20 result was above our and above consensus estimates at operating level. EBITDA margin for the quarter stood at 17.9% vs our and consensus estimates of 16.6%. We maintain our FY20/FY21 volume estimates and increase realisation on account of BSVI transition. We expect two-wheeler industry volumes to be weak for next 6 months, as cost increases (BSIV to BSVI transition) would hurt 2W industry demand. We increased our revenue and earnings estimates for FY20/FY21 by 3% and 6%/2% respectively. We expect our revenue/earnings CAGR of 6%/8% over FY19-21E with ROE of ~21% and average free cash flow of ~Rs40bn. We maintain our...

Dominant exports share hedge against domestic 2-W pain The domestic 2-W space has been bearing the brunt of the slowdown in discretionary consumption spending recently as illustrated by (i) decisive underperformance vis--vis PV category in Q3FY20 (14.9% YoY 2-W degrowth vs. 0.5% YoY PV de-growth), (ii) elevated dealer inventory (~35 days vs. ~25 days for PV as per FADA at end of December) (iii) and continuing soft retail demand. BS-VI products rolled out thus far by other OEMs are ~15% costlier than outgoing BS-IV versions. This fails to enthuse us about swiftness in recovery, going forward, save for some possible pre-buying...

Bajaj Auto posted a strong set of numbers Q3 FY20, as volume fall was moderated at just 4.6% yoy on festive cheer. Realizations marched up handsomely by 7.6% yoy to Rs 61,842/unit on product mix better and steady exports. Forex benefits, RM costs tailwinds led to a 7 quarter high...

Re-iterate BUY as (1) Bajaj is well prepared for BS-VI due to its tie up with KTM. Further, 3W/exports are ~50% of volumes which provides cushion against volatility in domestic 2Ws. (2) Co is launching new premium brands in India including the Husqvarna and Triumph (3) Valuations at 17/15x for FY21/22E are not demanding and RoEs are in excess of 20%. Bajajs 3QFY20 PAT (Rs 12.6bn, +15% YoY) was ahead of estimates as operating margins surprised at 17.9% (+130bp QoQ) due to higher share of exports/3Ws as well as favorable fx. Reiterate Bajaj as preferred pick in the sector. Maintain BUY with a revised TP of Rs 3,630 (@ 18x Dec-21E EPS).

Bajaj Auto's (BJAUT) Q3 EBITDA rose 18% YoY led by 17.9% margins (seven-quarter high) and beat estimates by ~10%.

30 January 2020 BJAUTs strong operating performance in the quarter was driven by mix, RM and FX. leverage) and RM are likely to exert pressure on margins over the next 2-3 quarters. We marginally upgrade our EPS estimate but maintain our with a target price of ~INR3,373 (~16x Dec21E consol. Revenue/EBITDA/PAT grew 3%/13%/14.5% YoY to INR76.4b/INR13.7b/INR12.6b in 3QFY20. For 9MFY20, revenue was up 1% YoY, EBITDA declined 3% YoY, while PAT increased 2.5% YoY. The sequential decline is a reflection of the higher share of economy motor cycles and lower 3Ws, as well as higher consumer marketing schemes (netted-off from revenue).

Bajaj Auto Ltd (BAL) is expected to outpace the 2W industry growth in a challenging demand environment. Domestic 2W industry growth is expected to remain under pressure over the next three to four quarters due to huge cost increases on account of transition from BS4 emission norms to BS6 emission norms. Amongst listed players, BAL would be the least impacted by the transition due to lower inventory, higher share of exports (which are immune to BS6 Norm change) and higher share of premium bikes which would see a relatively lower cost...

Mixed results; BSVI launch expected next year Bajaj Auto is the world's sixth-largest manufacturer of motorcycles and the second-largest in India. It is also the world's largest three-wheeler manufacturer. The company is based in Pune, Mumbai with plants in Chakan (Pune), Waluj (near Aurangabad) and Pantnagar in Uttarakhand. Bajaj Auto...