Bajaj Auto Ltd. share price target

Domestic launches to be offset by export uncertainty Q3 FY17 results came in line with our expectations Bajaj Auto posted a decent set of numbers despite the DeMon impact taking toll on its volume performance in Q3. We witnessed volume reduction for the company at 17.5% qoq and 10.5% yoy. Realizations growth came in at 1.4% yoy as product mix improved. 170 mn of exchange benefit coupled with higher Platina sales as compared to lower CT 100 sales led to margin sustainance above 20%. Higher than expected other income elevated due to FMP revaluation under IND AS led to net profits moving up. Net profits came in at 9.25 mn which were below...

Reported PAT at Rs11.2bn vs. Our Estimate of Rs9.96bn Revenue declined by 0.4% yoy to Rs60.5bn (vs. our estimate of Rs60.0bn) owing to better product-mix, given 2.3% yoy decline in volume. Backed by better Pulsar volumes, higher three-wheeler exports and improved spare parts revenue, BAL's ASPs improved by 1.5% qoq. EBITDA dipped by 1.5% yoy to Rs13.0bn, but topped our estimates by 7.0%. With improved product-mix, the EBITDA margin rose by 90bps qoq to 21.4%, while dipped by 30bps yoy due to 30bps yoy contraction in gross margin. Other income rose by 27.6% yoy to Rs3.4bn, which is 36.8% above than our estimates. With healthy performance on...

ICICI Securities Ltd | Retail Equity Research Bajaj Auto reported its Q2FY17 results that were above our estimates on all parameters. Net revenues were at | 6055 crore (down 0.4% YoY, up 5.3% QoQ) in line with our estimate of | 6049 crore Domestic revenues came in at | 4218 crore (up 22% YoY, 7% QoQ) higher than our estimate of | 4198 crore while export revenues came...

Bajaj Autos 2QFY17 EBITDA margin at 21.3% (Rs 11.7bn) was above estimates driven by richer product mix (higher 3W and premium bike sales). Net sales at Rs 60.5bn (flat YoY), increased in ASP 1.5% QoQ (flat YoY) was offset by volumes declined 2.3% YoY ( 3.7% QoQ). APAT at Rs 11.22bn ( 6.7% YoY), boosted by higher other income (driven by revaluation of MF Investment).

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...