Bajaj Auto Ltd. share price target

The festivals started on a slow note, but History indicates a strong correlation between weak oil & impact on its exports (FY16 & picked up during the last few days of FY17). We think this will repeat in FY21e as well & expect ~27% YoY degrowth in exports. Navratri/Dussehra post clarification on GST,...

Bajaj Auto posted a strong set of numbers in Q4 FY20, as a volume fall 0f 17% yoy was quite arrested by a 10.1% hike in realizations on a better product mix and benign hike in input costs. The topline fell by 8% yoy and 11% qoq. Better realizations, steady forex benefits, RM costs tailwinds led to an 8 quarter high EBITDA margins at 18.4% up from 15.7%/17.9% yoy and qoq respectively. RM costs to sales ratio fell to 70.6% from 74% yoy and 71.8% qoq leading to a robust margin performance. Other income grew by 23%, while depreciation grew by just 4%. On 24% tax rate, net profits zoomed up by 36% yoy to 13.1 bn. On a qoq basis, they grew by 4%. Covid -19 impact to be seen in H1 FY 21, all hopes on H2.....

Bajaj Auto Limited (BAL) Q4 FY20 results were ahead of our as well as street estimates on account of better realisations per vehicle, driven by a better product mix and higher export realisations. Favourable currency movement and soft commodity prices helped margins beat estimates. Going ahead, the two-wheeler industry is likely to witness faster recovery driven by higher rural exposure. A strong rabi harvest, expectations of good monsoon and the government's recent reforms to open end markets for farmers would boost farm incomes and in turn, two-wheeler demand....

20 May 2020 Bajaj Autos (BJAUT) strong operating performance was driven by mix and Fx, which supports our view that the company has several levers to protect margins. Volume recovery for both India and exports is expected in 2HFY21, with risk of financing for India and oil prices/Fx devaluation for exports. We downgrade our EPS for FY21/FY22E by 4% as we cut volumes but factor in the favorable Fx. Maintain our rating. 4QFY20 revenue/EBITDA/PAT grew -8%/2%/23% YoY to INR68.2/ INR12.5b/INR13.1b. Realizations grew 10.5% YoY (8% QoQ) to INR68.7k (v/s est. INR64.7k), driven by better mix (higher 3W, exports and premium motorcycles) and Fx. Gross margins improved ~150bp QoQ (+340bp YoY), driven largely by mix, higher share of premium motorcycles and favorable Fx.

We recommended SELL on BAJAJ AUTO with a Target Price of Rs 2450, a downside of 9% from CMP and Stop Loss Rs 2785.

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...