Bajaj Auto Ltd. share price target

Bajaj Auto (BAL) reported steady Q4FY19 numbers with a surprise on ASPs (up 5% QoQ at | 60,533/unit) & exceptional item (| 342 crore) resulting in 21% increase in PAT on a YoY basis. Net revenues came in at | 7,395 crore (up 9.2% YoY). Total volumes for the quarter were at 11.9 lakh units (up 14% YoY) wherein 2-W volumes were at 10.0 lakh units (up 17% YoY) and 3-W volumes were 1.9 lakh units (up 1% YoY). Reported EBITDA margins were at 15.7% (up 11 bps QoQ). PAT in Q4FY19 grew 20.9% YoY to | 1,306 crore. PAT was higher supported by | 342 crore as exceptional gain realised in...

Bajaj Auto (BJAUT) reported strong set of numbers in subdued environment as Net sales stood at Rs 74.5bn (+9% YoY / -0.7% QoQ). Realizations were at Rs 62.5k (-4.5% YoY and +4.8% QoQ) on superior product mix led by strong export sales. Gross margins at 28.4% (-300bps YoY/ +20bps QoQ) were impacted by continued pricing disruption in entry level motorcycles (CT100 and platina). The exports volumes continued to grow stronger led by Africa, Indonesia (+13% YoY) which boosted the realizations on QoQ basis. The adjusted EBITDA margin stood at 16.5% (-380bps YoY/+31bps QoQ) and were impacted by higher staff costs (+17%...

We re-iterate BUY as (1) Bajaj's market share is back to 25% in motorbikes (earlier seen in CY16) (2) They will launch new variants particularly in the executive segment to increase share in the domestic segment (3) The margins are stabilizing at current levels. Bajajs adj. 4QFY19 PAT at Rs 10.7bn (-1% YoY) was inline with our estimates. We expect Bajaj to grow ahead of the market in FY20 as well driven by new launches across its product range. Our revised TP is Rs 3,330 (based on its long term ten year average PE multiple of 17.5x on FY21E earnings). While the two wheeler industry growth has been benign, Bajaj has expanded market share by recalibrating its strategy. Further, the company has a diversified product portfolio with three wheelers and exports accounting for ~50% of volumes. Re-iterate BUY.

EBITDA margins flat QoQ despite better mix, favorable commodity prices: Revenues grew 9% YoY to INR74b (our est. INR71.4b), with volume growth of 14% YoY. Realization improved 5.3% QoQ (down 4.6% YoY) to INR62k/unit (our est. INR59.8k/unit) due to favorable mix. EBITDA declined 12.6% YoY to INR11.6b (in-line), implying an EBITDA margin of 15.7% v/s our est. of 16% (390bp YoY, +10bp QoQ). Higher other income boosted adj. PAT to ~INR10.7b v/s our est. of ~INR10b. FY19 volumes/revenue/EBITDA/PAT grew 25%/20%/3%/10% - largely reflecting for trade-off of margins for market share. Management commentary: (a) Despite regional festivals in few states,...

(BAL) results are ahead of estimates on the operational front. Revenues at Rs 7,395 crore rose 9% y-o-y (broadly in line with estimates) driven by a strong 14% growth in volumes. BAL's efforts to gain market share in the domestic motorcycle segment and healthy export growth boosted volumes. Realization/vehicle dropped 5% y-o-y due to an adverse mix (higher share...

Bajaj Auto (BJAUT) is strategically shifting its focus away from margins in an attempt to recoup its lost market share in domestic motorcycles. The aim is to expand its market share further to ~24% from ~18.7% now by plugging gaps in the portfolio. We expect domestic 2W demand trends to remain volatile until 1HFY21, with the risk of BS6 cost inflation puncturing the expected recovery in 2HFY20

EBITDA margin came in at 15.6% down by 397bpsYoY due to a) higher commodity cost b) higher discounts c) lower than expected forex realizations. PAT grew by 16%YoY due to higher other income We expects the EBITDA margin to be in range of 16-17% due to competition in the commuter segment. Given its strong brands and robust distribution network, BAL is in a superior position to benefit from export market. We expect revenue CAGR of 10% over FY19E-21E led by strong rural demand, new planned launches and export sales, will drive volume growth....

Attractive Valuation BUY: HMCL has faced major headwinds in the last nine months including aggressive price cuts by its nearest competitor Bajaj Auto (BAL) and five year insurance norm for two wheelers.

Strategy on entry level (M1) segment BAL took price cuts in the entry level segment in Q1FY19 to expand the lower end of market and also to gain market share. As a result, the company recorded a growth of 61% YoY in Q3FY19 as against 38% growth for the industry. CT sold over ~181,000 volumes, a growth of 77% over Q3FY18 and Platina clocked over ~195,000 units, growth of ~38% over Q3FY18. This resulted in market share improvement from 31.7% in Q3FY18 to ~37% in Q3FY19. BAL plans to occupy 45-50% of the market share in the M1 segment over the medium term. Currently, Platina sales are picking up in the near term which is profitable compared to...