Bajaj Auto Ltd. share price target

Bajaj Auto'Q3 FY19 result continued to be a mixed bag. Topline and bottomline continued to witness strong growth while operating margin posted a significant decline. The company's net profit came in at Rs 1,220.77 crore, higher by 20%. Total income came in at Rs 7,409.36 crore,...

The policy direction in the upcoming budget will be a key determinant of two wheeler industry growth, though we expect competitive intensity to remain elevated in the near term. Bajaj Autos operating margins continue to be impacted by 1) an inferior product mix as the share of entry level models now stands at 58.4% of sales vs.52/58% YoY/QoQ 2) fall in 3W volume(-1% YoY) and 3) unabsorbed material cost in exports. Thus, EBITDA margins declined to 15.6% vs. 16.8% QoQ. However, this was offset by higher other income at Rs.4.7 bn(+23% QoQ). Thus, the reported PAT at Rs. 11bn was up +16% YoY.

BJAUT's strategy to gain market share in the domestic motorcycle segment might have provided the company and its dealers much needed volumes but at the cost of profitability and margins. Management expects to continue with this aggressive pricing strategy and consumer offers in the low margin domestic M1 motorcycle segment. Given no incremental growth expected in continue to be under pressure. We reduce our margin estimates for FY19/20E by 20/20bps, respectively. We value the stock at 15.5x Sep20 (earlier 16x Mar'20) core EPS plus Rs100 as value of investments (KTM) and maintain...

Revenue grew 16% yoy to Rs74.1bn (Emkay est.: Rs73.9bn) on 26% growth in volume and an 8% drop in realization due to adverse mix. After robust volume growth of 25% in FY19E, we expect growth to taper to 8% over FY19-21E, led by a high base and price increases resulting from regulatory changes. EBITDA margin contracted 150bps qoq to 15.6% (Emkay est: 16.4%) due to lower exchange rate realization (~40bps), commodity inflation (~40bps), and adverse mix (lower share of 3Ws, higher share of Africa in exports). Going forward, focus on market share, partial absorption of regulatory costs, and adverse mix could restrict margin expansion....

Bajaj Auto sold 13.39 lakh units in the quarter ended Sept 2018, higher by 25% compared with 10.71 lakh units sold in corresponding quarter last fiscal. Motorcycles sales increased 22.6% to 11.26lakh units while commercial vehicle sales rose 39.3% to 2.12 lakh units. While domestic...

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 50% YoY in Q2FY19 as against 27% growth for the industry. CT sold over ~248,000 volumes, a growth of 40% over Q2FY18 and Platina clocked over ~153,000 units, growth of ~47% over Q2FY18. This resulted in market share improvement from 32% in Q2FY18 to ~38% in Q2FY19. BAL plans to occupy 45-50% of the market share in the M1 segment over the medium term....

Subdued Performance; Healthy Exports to Drive Bottom-line Bajaj Auto (BAL) has delivered a subdued operating performance in 2QFY19 with its EBIDTA margin contracting by 292bps YoY and 46bps QoQ to 16.8%. Aided by 24% YoY and 9% QoQ growth in volume to 1.33mn units, its revenue grew by 21% YoY and 7.8% QoQ to Rs78.3bn vs. our estimate of Rs81bn. ASP declined by 2.2% YoY (-1.4% QoQ) led by poor product-mix and price rationalisation. EBIDTA growth came in lower at 3.4% YoY and 5% QoQ due to lower realisation, while PAT increased by 4% YoY and 3% QoQ to Rs11.5bn (vs. our estimate of Rs11.8bn). Higher commodity prices and limited ability to pass on the same led to 327bps YoY and 98bps QoQ...

Bajaj Auto (BJAUT) Q2FY19 result was below our and consensus expectations at operating level. EBITDA margin for the quarter stood at 16.8% vs our and consensus estimates of 17.1% and 17.3% respectively. Net Revenue were above our and in-line with consensus estimates at Rs79.8bn due to weaker domestic realizations. Result Highlights and Investment Rationale Operationally weak quarter: Revenues grew +21.4% YoY/+7.6% QoQ to Rs79.8bn, led by growth of +25% YoY/+9% QoQ in sales volumes to 1.3mn. Net realizations continue to decline for Q2FY19 by -1.4% QoQ due to higher discounting in CT100...

Bajaj Auto (BAL) reported muted performance in Q2FY19 primarily tracking change in product mix with skewness more towards entry level products (CT100 & platina) in the domestic and export markets Total volumes for Q2FY19 stood at 13.4 lakh units (up 25% YoY). Total 2W sales volume in Q2FY19 was at 11.3 lakh units, up 23% YoY while 3W sales volume were at 2.1 lakh units, up 39% YoY. Domestic volume growth was at 19% in the 2W segment & 32% in the 3W segment. Domestic realisations stood at | 61,194/unit in...

Maintain BUY with a SOTP-based TP of Rs 3,174 (17x Sept 20E Core EPS + cash + 40% discount for KTM stake) vs Rs 3,411 earlier. Higher contribution of entry level models (CT 100 and Platina in domestic 2W and Boxer in export) in the sales mix weighed on 2QFY19 margins for Bajaj Auto (BJAUT). Despite 25% volume growth, EBITDA rose only 3.5% YoY at Rs. 13.43bn at a disappointing 16.8% margin (vs est 17.3%). PAT grew by 4%YoY to Rs 11.52bn. Management expects ~150bps margin expansion in FY20 with full-year benefit of rupee depreciation.