Bajaj Auto Ltd. share price target

Bajaj Auto (BJAUT) reported Q1FY19 results earnings were below our and consensus expectations. Net Revenue were below our and consensus estimates due to weaker domestic realizations. EBITDA margin for the quarter stood at 17.3% vs our and consensus estimates of 19.5% each. Adj. PAT for the quarter stood at Rs11.1 bn below our and consensus estimates of Rs12.3 bn and Rs12.4 bn due to higher RM cost. Revenues grew +36% YoY/+10% QoQ to Rs74.1bn (IDBI: Rs79.2bn; Consensus: Rs77.6bn), led by growth of +38% YoY/+18% QoQ in sales volumes and -7% QoQ decline in net realizations. Sales volumes were supported by growth of +86% YoY/-20% QoQ and +39%...

ICICI Securities Ltd | Retail Equity Research Bajaj Auto reported Q1FY19 results below our estimates on the operational front. Net revenues came in at | 7419 crore (up 36.3% YoY, 9.5% QoQ) against our expectation of | 7979 crore. The miss at the topline level is attributable to lower-than-expected realisations in both the domestic as well as export business Domestic revenues came in at | 4116 crore (up 26.2% YoY, down 3.1% QoQ) vs. our expectation of | 4578 crore while export revenues...

Bajaj Auto Limited ( BAL) is a $2.3 billion company founded in 1926. It is world's fourth largest two and three wheelers manufacturer. BAL has three plants in all, two at Waluj and Chakan in Maharashtra and one plant at Pant Nagar in Uttaranchal. In India, company has a distribution network of 650 dealers and over 1,600 authorized services centers. It has 171 exclusive dealers for the three wheeler segment .It has total 3750 rural outlets. The Bajaj brand is well-known across several countries in Latin America, Africa, Middle East, South and South East Asia. It has a distribution network in 50 countries...

Global short-end yields rose as US Fed chairman indicated that the economy continues to do well and two more rate hikes are on the cards. US and European equity markets went up as economic data remains robust. Crude prices went down as US may ease its stance on Iran sanctions. This along with another Rs 100bn OMO supported the domestic bond market. Even FPI inflows were seen in debt market. INR fell to 69.05/ USD as equity outflows...

Maintain BUY with a SOTP-based TP of Rs 3,394 (18x 20E Core EPS + cash + 40% discount for KTM stake) vs Rs 3,712 earlier. Aggressive pricing and higher contribution of entry level models in the sales mix weighed on 1QFY19 margins for Bajaj Auto (BJAUT). Net revenue at Rs 74.2bn (+36% YoY) was led by stellar 38% volume growth (2W +33%, 3W +74%), but was partially offset by ~1% decline in net realization. EBITDA rose 36% YoY at Rs. 12.8bn at a disappointing 17.3% margin. APAT rose 17%.

Weak Performance; Healthy Exports to Drive Bottom-line Bajaj Auto (BAL) has delivered a disappointing operating performance in 1QFY19 with its EBIDTA margin falling by 215bps QoQ (flat on YoY basis) to 17.3%. Aided by 38% YoY and 17% QoQ growth in volume to 1.2mn units, its revenue grew by 36% YoY (+10% QoQ) to Rs74.2bn vs. our estimate of Rs77.6bn. ASP declined by 1.3% YoY (-6.6% QoQ) led by poor product-mix and price rationalisation. EBIDTA growth came in lower at 37% YoY and 3% QoQ due to lower realisation. Its net profit rose by 18% YoY (+3% QoQ) to Rs11.1bn vs. our estimate of Rs13bn. Higher commodity prices and limited ability to pass on the same led to 143bps YoY and 208bps...

company intends to take up to 45% in mid term. Bajaj Auto has taken price cuts in this segment to gain market share and has categorically targeted this segment. The company which has tasted failure in the mid segment due to the likes of the V segment is now planning to focus only on the mass and premium segments through various marketing gimmicks such as providing subventions to the customers, easy availability of finance,...

Strong sales performance led by volume growth: The company's revenue rose 36.3% YoY to Rs74,193mn in Q1FY19, driven by strong overall volume growth of 38.1%. Domestic sales stood at 688,665 units, a growth of 43.8% yoy whereas exports sales reported a growth of 31.4% to 537,976 units. The average realization contracted by 1.2% yoy due to adverse product mix as strong sales came from entry level bikes. Margin disappoints with no signal of recovery in near term: Bajaj's standalone EBITDA margin stood at 17.3% in Q1FY19 vs 17.2% in Q1FY18 (19.4% in Q4FY18), below our estimates. The marginal yoy expansion in margin was mainly due to lower employee...

Change in Growth Strategy Upgrade BUY;BAL has reduced price of its entry level motorcycle CT 100 by ~ Rs2000(7% price cut) which contributes 14% of its overall volumes.

We expect continued value migration away from the Executive motorcycle 100/125cc segment toward the Scooters (driven by wider appeal), Premium >150cc (driven by need for uniqueness and upgrade) and Entry motorcycle 100cc (driven by substantial value proposition) segments. BJAUT's strategy is to capitalize on this value migration by focusing on the Entry and Premium motorcycle segments. BJAUT attributed the loss of volumes (~1% decline) and market share (~230bp to 15.7% in domestic motorcycle) to the poor performance in the M2 & M3 segment (Executive segment) in FY18. Commuter and Commuter Deluxe segment (with a size of ~6.5m per annum) is the largest in the motorcycle industry, but BJAUT has a very weak presence with just 2.6% market share in FY18 through Discover and the V. Nevertheless, BJAUT has realized the need to compete far more vigorously in this segment.