Bajaj Auto Ltd. share price target

Quarterly Trend: Export weakness has been denting Bajaj Auto's (BJAUT) performance in recent quarters, as volatility & USD shortages in markets such as Nigeria, Egypt and Latin America have led to a sharp fall in export revenues. Domestic Revenues, on the other hand, have been robust, growing at 28%/26% in Q4FY16/Q1FY17, respectively, on the back of new launches and market share gains. Near-term demand trends mixed: Over FY17/18E, we expect Bajaj to see a modest sales improvement from current depressed levels as 1) Improvement in rural purchasing power on the back of monsoons/higher MSP's/7PC reverses the declining trend for entry level motorcycles (~50%+ rural) over the past 2 years; 2) Troubled markets Egypt/Nigeria/Venezuela see some recovery on a low base via...

Takeaways : 2Ws have evolved into a marketing-led industry, not an engineering-led industry. Focus key to leverage on large global opportunity in motorcycle segment.Targeting niche vehicles for urban markets, including electric 2Ws .Sees opportunity in value (Splendor/Passion) and sports (Royal Enfield) segments. For customer acquisition, differentiation is the key – offer what the key competitor does not. Novelty trumps trust at the market place. BJAUT prefers the strategy of differentiation over the strategy of familiarity. Losing differentiation is a fundamental mistake. In Discover, BJAUT diluted the differentiated positioning of 'Joy to Ride' bike. It has learnt from the mistake of extending the Discover brand. Every brand that BJAUT has launched since January 2015 has been successful, as it has been positioned distinctly.

Valuation : At 17x FY18E S/A EPS are reasonable, considering (a) scope of profitable market share gain, (b) high visibility of sustenance of superior profitability, (c) lower capex requirement, driving high RoIC, and (d) increasing cash, driving possibility of higher dividend payout. We value BJAUT at INR3,455 (18x FY18E S/A EPS and add INR187/share for its KTM stake). Maintain Buy

risk to our FY18 export volume growth of 17%. While we increase our EPS estimates marginally (by 3%) for FY18, we up our target multiple by 10% from 16x based on improved exports business outlook and a revival in the 2W (twowheeler) industry in...

Bajaj Autos 1QFY17 EBITDA margin at 21.3% (Rs 11.7bn) was below estimates driven by an inferior sales mix (lower exports). Increments drove up employee expenses 40bps YoY. Net sales at Rs 57.5bn ( 3% YoY) were a miss on lower ASPs (-7% QoQ) in exports. APAT at Rs 9.8bn ( 2% YoY) was boosted by lower tax.

Key highlights: Weak quarter overall as the company took price action in key export markets.WithavailabilityofUSDexpectedtoimproveinkeymarketsofNigeriaandEgypt, weseesequentialimprovementinexportvolumes.Domesticsalesshouldremainstrongon successful new launches.We remain upbeat on its longerterm prospects, as newproduct launches, strong threewheeler volumes, and aggressive pricing will help it to improve its domesticmarketshareandexportswillbestable.Wetweakourestimatesandincorporate...

ICICI Securities Ltd | Retail Equity Research Bajaj Auto reported its Q1FY17 results, which were below our estimates on topline & bottomline front but above estimates on the operational front. Net revenues were at | 5748 crore (up 2.7% YoY, 7.2%QoQ), against our estimates of | 6060 crore. Domestic revenues came in at | 3927 crore (up 25% YoY, 8% QoQ) lower than our estimate of | 4028 crore, mainly on account of lower than estimated ASPs. Export revenues came in at | 2057 crore (down 22% YoY, up...

Unfavorable mix drags realizations QoQ: Net sales grew ~2.7% YoY (+7.2% QoQ) to INR57.5b (v/s est. of INR58b) as realizations increased 4.5% YoY (-6% QoQ), while volumes declined 1.8% YoY (+14% QoQ). Realizations declined QoQ due to a weaker product mix, mainly impacted by a fall in contribution from 3Ws (150bp QoQ) and lower exports (-100bp QoQ). Lower USD/INR rate (INR67.1 in 1QFY17 v/s INR67.5 in 4QFY16) too pulled down realizations. EBITDA margins decline due to weaker exports: Gross margins declined 130bp QoQ (+20bp YoY) due to unfavorable product mix (lower share of exports and higher share of entry-level motorcycles), adverse FX rate and rising commodity...

Bajaj Auto (BAL) delivered decent Q1FY17 performance with operating margins and EBIDTA coming in line with our estimates. Its revenues/EBIDTA/adj PAT rose 2.7%/3.2%/2.2% YoY but fell 7.2%/2%/3.1% QoQ to Rs 57.5bn/11.8bn/9.8bn as against our estimate of Rs 57.1bn/11.6bn/9.2bn respectively. Its volume declined by 1.9% YoY but up 14.1% QoQ to 0.994mn units. Its realization/vehicle fell 5.9% QoQ (up 4.8% YoY) due to product mix (lower 3Ws), geographical mix and price rationalization in exports market. Its export realization/vehicle in USD terms fell 4.2% YoY due to product mix (lower 3W contribution) and price rationalization by passing on currency benefit. It's EBIDTA margin rose 10bps YoY (down 104bps QoQ) to 20.5% (Our Est was 20.3%), as RM/Sales fell 18bps YoY (up 132bps QoQ) to 67.2% and Other Exp/Sales decreased by 25 bps YoY/117 bps QoQ to 7.7%.

Operating performance of Bajaj Auto (BAL) came broadly in line with our estimates with 7.4% higher-than-expected PAT owing to higher other income, while revenue and EBIDTA missed our estimate by meagre 2.0% & 3.4% in 1QFY17. We continue to appreciate BAL's strategy to focus on premium motorcycle segment and maintain its EBIDTA margin in high trajectory. Further, strong cash in books Rs107.01bn translating into Rs370/share augurs well for BAL. We upgrade our recommendation to BUY on the stock with an...

ICICI Securities Ltd | Retail Equity Research Bajaj Auto reported its Q4FY16 results, which were above our estimates on the operational front. Net revenues were at | 5411 crore...