Research firm Prabhudas Lilladher has maintained a market performer rating on Bajaj Auto. The stock is trading at 12.4x FY09 EPS of Rs 177.
Result Snapshot
Bajaj Auto's Q1 FY08 results surpassed our expectations. Net sales were down only by 4%, to Rs 2.1 billion, despite a 12% yoy deceleration in volumes. Contribution per vehicle slightly improved (increasing by 2.2% yoy) despite material cost (as percent of sales) being up by 178bp yoy as 3-wheeler exports formed a greater proportion of sales. The margin, at 13%, was in line with our expectations. PAT was down by 18% to Rs 2.26 billion against our expectations of Rs 2.06 billion. The stock trades at 12.4x FY09 EPS of Rs 177. With the clarity surrounding the success of its new bike yet to materialise, we maintain a MARKET PERFORMER.
Result highlights
Bajaj Auto's Q1FY08 results surpassed our expectations. Net sales were down by only 4% to Rs 2.1 billion despite a 12% yoy slide in volumes. This was partially helped by excise relief at the Uttaranchal plant. Contribution per vehicle marginally improved despite the fact that material cost (as a percent of sales) was up by 178bp yoy, as 3-wheeler exports formed a greater proportion of sales. Contribution per vehicle increased by 2.2% yoy. Margins, at 13%, were in line with our expectations. PAT was down by 18% to Rs 2.26 billion against our expectations of Rs 2.06 billion, helped by lower excise duty. The effective tax rate has remained at the 31% levels. This indicates that the company is not making profits on Platina after passing on a Rs 3,000 discount per bike. In other words, the company has not been able to avail of the income tax benefits from Uttaranchal as yet. This has been the lowest-margin quarter for the company for a long time, which means that BAL has started to feel the pressure of cutthroat competition prevalent in the industry. To provide some margin relief, the company has raised prices on its Platina and Discover by Rs 500 wef 1st July.
Lowest-ever margins
The company had reduced the price of its Platina by Rs 3,000 last quarter, soon after production was shifted to Uttaranchal, thereby passing on the excise benefits to customers. Pricing pressure coupled with rising raw material cost has dealt a double blow, with the company reporting, at 13.1%, its lowest-ever margins in the recent past.
Estimates maintained
With the uncertainty surrounding the success of its new bike in the entry-level segment, we have maintained our estimates. We expect BAL to post a 16.8% growth in its top line at Rs 111 billion in FY08. However, PAT is expected to rise by only 9% yoy to Rs 14 billion.
Our View
We believe that BAL would be able to sell about 1.1 million 2-wheelers in H1 FY08 while it would end the year with sales volumes of about 2.7 million. Also, if the new 2-wheeler proves a success in the likes of Pulsar, BAL would make a major breakthrough in the entry-level 100-cc segment where Hero Honda has a 90% share. However, although we believe that the new bike might provide a positive surprise, we have not included any major contribution from it in our estimates. The stock trades at 12.4x FY09E EPS of Rs 177. With the clarity surrounding the success of its new bike yet to materialise, we maintain a MARKET PERFORMER rating. We continue to represent our forecast according to the old BAL structure. We shall introduce financial figures after the balance-sheet division is complete.
Edelweiss Research has recommended accumulate rating on Bajaj Auto. The company's Q1FY08 results were lower than research house estimates.
Bajaj Auto's Q1FY08 results were lower than ours and consensus estimates. Adjusted net profit was down 18.1% Y-o-Y to Rs 2.26 billion. EBITDA fell 23.7% Y-o-Y to Rs 2.75 billion. EBITDA margins were at 13.1%, down 330bps Y-o-Y. We believe the margin outlook for the next 2-3 quarters is much better and margins are expected to improve to ~ 15% on account of price revisions, ramp up of Uttarakhand plant, and launch of a new bike (on September 9, 2007) that is likely to be much more profitable than the company's other low-end products in the segment. We are upgrading our recommendation on the stock to 'ACCUMULATE', post the recent price correction and improving margin and volume outlook for its core business.
Key Highlights
Lower than expected results in Q1FY08
Net sales (at 21.09 bn), were down 4.2% Q-o-Q, primarily on account of falling volumes, though average realisations improved 8.5% Y-o-Y on the back of improving product mix. EBITDA fell 23.7% Y-o-Y to Rs 2.75 billion and EBITDA margins were at 13.1%, down 330bps Y-o-Y. Adjusted net profit was down 18.1% Y-o-Y to Rs 2.26 billion. Further, staff costs, as a percentage of sales, increased 80bps Y-o-Y due to bonuses and increments given in the quarter. In addition, other expenses increased 44bps because of higher advertising expenditure.
Margins set to improve
We expect the company to improve its margins to ~15% in the second half of FY08 on back of price revisions, ramp up of Uttarakhand plant, and launch of a new bike that is likely to be much more profitable than the company's other low-end products in the segment. The new bike's contribution to the company will be similar to that of Discover. We expect at least 70bps improvement in margins only from lower staff costs on account of non-recurring items worth INR 150mn.
Valuation
We are upgrading our recommendation on the stock to 'ACCUMULATE', post the recent price correction and improving margin outlook for its core business. Our sumof- the-parts (SOTP) valuation for the stock is at INR 2,546 per share.
Broking house, Networth Stock Broking has recommended hold rating on Bajaj Auto with a target of Rs 2350.
Highlights for the quarter
A lower excise duty (benefiting from the new Pantnagar plant where only cess is charged and higher exports) and a better sales mix helped to arrest the net sales decline by 4.2% yoy to Rs21091mn (Rs22026.6mn); on an 11.7% yoy drop in volumes.
A steep rise in employee costs (due to performance rewards and renewal of Accurdi wage agreement) together with increases in materials, marketing and promotional costs resulted in a 332 bps drop in EBITDA margins at 13.1%. EBITDA for the quarter fell 23.7% yoy to Rs2753.6mn (Rs3606.9mn).
An 8.6% yoy rise in other income, negligible interest expenses and a marginal rise in depreciation charge restricted fall in reported net profits to 14.9% yoy at Rs 2264.7mn (Rs2660.1mn).
The tax advantage at its new Pantnagar plant has started reaping in. So far the company has begun assembly of Platina at the new plant and this resulted in a lower excise charge for the quarter at 10.7 % (139 bps yoy) as only cess is required to be paid.
The company had introduced Discover 135 DTSi in April and Pulsar 220 DTSFi in June. During Q1, the company decreased its focus on the declining 100cc segment of motorcycles ahead of its scheduled launch of a new bike in entry level segment in September 07.
Exports focus of the company grew in the wake of a domestic slowdown and it paid well as it contributed 12.4% of sales. Exports grew 52% yoy in volumes and 42% yoy in value terms during Q1.
Valuations
Going ahead the fortunes of Bajaj largely depends on the new platform which it plans to launch in September, as it boasts of driving away volumes from the traditional 100cc towards its new motorcycle. We expect the sales volumes to be sluggish in the current quarter and revive towards the end of Q2 and in H2 with the launch of new bike and consumer demand in festive months. At the CMP of Rs 2195, the stock is fairly valued together with its embedded value, we maintain a Hold with a price target of Rs 2350.
Broking house, P-Sec has recommended buy rating on Bajaj Auto. The company has reported Q1FY08 results below expectation.
Bajaj Auto reported Q1FY08 results below expectation. Topline reported degrowth of 4.2% y-o-y above our expectation on account of improvement in realizations as the company has taken production cut to reduce the sale of 100cc volumes resulting in improved product mix. EBIDTA margins dropped by 366bps y-o-y due steep rise in input cost resulting in bottomline degrowth of 20.6% y-o-y. We expect the lull to continue during second quarter as well. While, volumes are expected to pick up post Q2 as new launches slated in September. BAL is well placed in two-wheelers space given its strategy to change its product mix by producing more of high end bike (>100cc) this should improve margins. The stock trades at 14.8x its FY09P earnings. We recommend BUY.
Result Snapshot
Bajaj Auto's Q1 FY08 results surpassed our expectations. Net sales were down only by 4%, to Rs 2.1 billion, despite a 12% yoy deceleration in volumes. Contribution per vehicle slightly improved (increasing by 2.2% yoy) despite material cost (as percent of sales) being up by 178bp yoy as 3-wheeler exports formed a greater proportion of sales. The margin, at 13%, was in line with our expectations. PAT was down by 18% to Rs 2.26 billion against our expectations of Rs 2.06 billion. The stock trades at 12.4x FY09 EPS of Rs 177. With the clarity surrounding the success of its new bike yet to materialise, we maintain a MARKET PERFORMER.
Result highlights
Bajaj Auto's Q1FY08 results surpassed our expectations. Net sales were down by only 4% to Rs 2.1 billion despite a 12% yoy slide in volumes. This was partially helped by excise relief at the Uttaranchal plant. Contribution per vehicle marginally improved despite the fact that material cost (as a percent of sales) was up by 178bp yoy, as 3-wheeler exports formed a greater proportion of sales. Contribution per vehicle increased by 2.2% yoy. Margins, at 13%, were in line with our expectations. PAT was down by 18% to Rs 2.26 billion against our expectations of Rs 2.06 billion, helped by lower excise duty. The effective tax rate has remained at the 31% levels. This indicates that the company is not making profits on Platina after passing on a Rs 3,000 discount per bike. In other words, the company has not been able to avail of the income tax benefits from Uttaranchal as yet. This has been the lowest-margin quarter for the company for a long time, which means that BAL has started to feel the pressure of cutthroat competition prevalent in the industry. To provide some margin relief, the company has raised prices on its Platina and Discover by Rs 500 wef 1st July.
Lowest-ever margins
The company had reduced the price of its Platina by Rs 3,000 last quarter, soon after production was shifted to Uttaranchal, thereby passing on the excise benefits to customers. Pricing pressure coupled with rising raw material cost has dealt a double blow, with the company reporting, at 13.1%, its lowest-ever margins in the recent past.
Estimates maintained
With the uncertainty surrounding the success of its new bike in the entry-level segment, we have maintained our estimates. We expect BAL to post a 16.8% growth in its top line at Rs 111 billion in FY08. However, PAT is expected to rise by only 9% yoy to Rs 14 billion.
Our View
We believe that BAL would be able to sell about 1.1 million 2-wheelers in H1 FY08 while it would end the year with sales volumes of about 2.7 million. Also, if the new 2-wheeler proves a success in the likes of Pulsar, BAL would make a major breakthrough in the entry-level 100-cc segment where Hero Honda has a 90% share. However, although we believe that the new bike might provide a positive surprise, we have not included any major contribution from it in our estimates. The stock trades at 12.4x FY09E EPS of Rs 177. With the clarity surrounding the success of its new bike yet to materialise, we maintain a MARKET PERFORMER rating. We continue to represent our forecast according to the old BAL structure. We shall introduce financial figures after the balance-sheet division is complete.
Edelweiss Research has recommended accumulate rating on Bajaj Auto. The company's Q1FY08 results were lower than research house estimates.
Bajaj Auto's Q1FY08 results were lower than ours and consensus estimates. Adjusted net profit was down 18.1% Y-o-Y to Rs 2.26 billion. EBITDA fell 23.7% Y-o-Y to Rs 2.75 billion. EBITDA margins were at 13.1%, down 330bps Y-o-Y. We believe the margin outlook for the next 2-3 quarters is much better and margins are expected to improve to ~ 15% on account of price revisions, ramp up of Uttarakhand plant, and launch of a new bike (on September 9, 2007) that is likely to be much more profitable than the company's other low-end products in the segment. We are upgrading our recommendation on the stock to 'ACCUMULATE', post the recent price correction and improving margin and volume outlook for its core business.
Key Highlights
Lower than expected results in Q1FY08
Net sales (at 21.09 bn), were down 4.2% Q-o-Q, primarily on account of falling volumes, though average realisations improved 8.5% Y-o-Y on the back of improving product mix. EBITDA fell 23.7% Y-o-Y to Rs 2.75 billion and EBITDA margins were at 13.1%, down 330bps Y-o-Y. Adjusted net profit was down 18.1% Y-o-Y to Rs 2.26 billion. Further, staff costs, as a percentage of sales, increased 80bps Y-o-Y due to bonuses and increments given in the quarter. In addition, other expenses increased 44bps because of higher advertising expenditure.
Margins set to improve
We expect the company to improve its margins to ~15% in the second half of FY08 on back of price revisions, ramp up of Uttarakhand plant, and launch of a new bike that is likely to be much more profitable than the company's other low-end products in the segment. The new bike's contribution to the company will be similar to that of Discover. We expect at least 70bps improvement in margins only from lower staff costs on account of non-recurring items worth INR 150mn.
Valuation
We are upgrading our recommendation on the stock to 'ACCUMULATE', post the recent price correction and improving margin outlook for its core business. Our sumof- the-parts (SOTP) valuation for the stock is at INR 2,546 per share.
Broking house, Networth Stock Broking has recommended hold rating on Bajaj Auto with a target of Rs 2350.
Highlights for the quarter
A lower excise duty (benefiting from the new Pantnagar plant where only cess is charged and higher exports) and a better sales mix helped to arrest the net sales decline by 4.2% yoy to Rs21091mn (Rs22026.6mn); on an 11.7% yoy drop in volumes.
A steep rise in employee costs (due to performance rewards and renewal of Accurdi wage agreement) together with increases in materials, marketing and promotional costs resulted in a 332 bps drop in EBITDA margins at 13.1%. EBITDA for the quarter fell 23.7% yoy to Rs2753.6mn (Rs3606.9mn).
An 8.6% yoy rise in other income, negligible interest expenses and a marginal rise in depreciation charge restricted fall in reported net profits to 14.9% yoy at Rs 2264.7mn (Rs2660.1mn).
The tax advantage at its new Pantnagar plant has started reaping in. So far the company has begun assembly of Platina at the new plant and this resulted in a lower excise charge for the quarter at 10.7 % (139 bps yoy) as only cess is required to be paid.
The company had introduced Discover 135 DTSi in April and Pulsar 220 DTSFi in June. During Q1, the company decreased its focus on the declining 100cc segment of motorcycles ahead of its scheduled launch of a new bike in entry level segment in September 07.
Exports focus of the company grew in the wake of a domestic slowdown and it paid well as it contributed 12.4% of sales. Exports grew 52% yoy in volumes and 42% yoy in value terms during Q1.
Valuations
Going ahead the fortunes of Bajaj largely depends on the new platform which it plans to launch in September, as it boasts of driving away volumes from the traditional 100cc towards its new motorcycle. We expect the sales volumes to be sluggish in the current quarter and revive towards the end of Q2 and in H2 with the launch of new bike and consumer demand in festive months. At the CMP of Rs 2195, the stock is fairly valued together with its embedded value, we maintain a Hold with a price target of Rs 2350.
Broking house, P-Sec has recommended buy rating on Bajaj Auto. The company has reported Q1FY08 results below expectation.
Bajaj Auto reported Q1FY08 results below expectation. Topline reported degrowth of 4.2% y-o-y above our expectation on account of improvement in realizations as the company has taken production cut to reduce the sale of 100cc volumes resulting in improved product mix. EBIDTA margins dropped by 366bps y-o-y due steep rise in input cost resulting in bottomline degrowth of 20.6% y-o-y. We expect the lull to continue during second quarter as well. While, volumes are expected to pick up post Q2 as new launches slated in September. BAL is well placed in two-wheelers space given its strategy to change its product mix by producing more of high end bike (>100cc) this should improve margins. The stock trades at 14.8x its FY09P earnings. We recommend BUY.
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