Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    

| More

ADD on Bajaj Auto - Resilient margins - HDFC Securities

Posted On: 2020-05-21 14:22:37

Mr. Aditya Makharia, Institutional Research Analyst, HDFC Securities

Bajaj Auto (Q4FY20 Results Review): Resilient margins. ADD
(TP Rs 2,850, CMP Rs 2, 558, MCap Rs 740 bn)

Bajaj Auto's 4Q PAT (flat/4% YoY/ QoQ) beat was driven by a richer product mix as well as improved profitability. Going ahead, as the environment will remain uncertain, the management expects margins to correct from ~18% levels of 4Q. The OEM will pass on the benefits of a weakening INR to aid demand, particularly in the African markets. We re-iterate our ADD rating on the stock, while we expect volumes in the high growth export markets (which are ~45% of vols) to decline in FY21E. A diversified product mix and healthy balance sheet will cushion the impact of the volatile macro environment.

4QFY20 Financials: Volumes declined ~17% YoY and QoQ. However, the average realization grew 10/8% YoY/QoQ owing to better product mix and price hikes. Revenues declined 8/11% YoY/QoQ. EBITDA margin at 18.4% expanded (+185/50bps YoY/QoQ) due to richer product mix and favorable forex rate. Corporate tax rate was lower at 23.9% (-650bps YoY) due to change in tax structure. Reported PAT grew flat/4% YoY/QoQ.

Call & other takeaways: (1) The Nigerian market is going through the dual crisis of COVID-19 and fall in crude prices; similar to the earlier downturn, the devaluation of the Nigerian Niara is causing concerns. (2) Most of Bajaj's export countries are under lockdown and retails in the international markets are currently at 35% of normal levels. (3) The co has gained market share in the African market, currently at ~40%. Bajaj is now the largest player, as the Chinese competition is highly fragmented. The co is the market leader across markets including Egypt. (4) In India, 50-60% of the dealerships are in the green zone and are witnessing a 50% productivity in sales, whereas servicing is at 65-70% of the normal levels. Overall retails are at 25% levels. (5) COVID situation will impact the customer's behavior as they will down trade to lower variants (within the respective categories). Rural and semi-urban areas could see positive impact post monsoons. (6) The share of financing is higher in 3Ws (as compared to 2Ws). Bajaj has 85-90% market share in small 3Ws which are not used for shared rides (more than 5 persons). Management expects this segment to be less impacted post COVID as the price hikes in larger 3Ws is significantly higher post BSVI transition.

STANCE: We increase our FY21/22E EPS by ~7% to factor in the higher than expected margins in 4Q. We continue to value the stock at 17x on FY22E EPS (in line with the long term historic average trading multiple) with a TP of Rs 2,850. Key risks: Extended impact due to COVID on the downside, an increase in oil prices on the upside.

Shares of BAJAJ AUTO LTD. was last trading in BSE at Rs.2558.05 as compared to the previous close of Rs. 2509.15. The total number of shares traded during the day was 16443 in over 2394 trades.

The stock hit an intraday high of Rs. 2577.55 and intraday low of 2460. The net turnover during the day was Rs. 41652888.

Source: Equity Bulls

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

IPO Review - Computer Age Management Services - ICICI Securities

Company Update - EIH Ltd - ICICI Securities

Gladiator Stocks - Godrej Properties - ICICI Securities

Company Update - Dr Reddy's Laboratories - ICICI Securities

Gladiator Stocks: Pharma Thematic - ICICI Securities

Company Update - Housing & Urban Development - ICICI Securities

Covid Recovery Pulse - E-Way bill generation shows recovery signs with auto volumes flat - ICICI Securities

Quant Pick - UltraTech Cement - ICICI Securities

Lupin & Cipla - Positive News - Angel Broking

Sterling and Wilson Solar Ltd - 106.71 MW order win - Angel Broking

Dr. Reddy's Laboratories - Settles Revlimid litigation in US - ICICI Securities

Natco Pharma - Natco to launch first generic Revlimid - ICICI Securities

Solar Industries - Overseas and defence key to profitability - ICICI Securities

Federal Bank - Strengthening liability muscle; fees & charges revised upwards - ICICI Securities

HCL Technologies Mr. Jyoti Roy, DVP - Equity Strategist, Angel Broking Ltd


I-direct Instinct - Intellect Design Arena

P&G Health - Company Update - ICICI Securities

Relaxo Footwears - Mr. Amarjeet Maurya- AVP - Mid Caps, Angel Broking Ltd

Bata India - Mr. Amarjeet Maurya- AVP - Mid Caps, Angel Broking Ltd

Listing of Happiest Minds Technologies - Angel Broking

Dr. Reddy's Lab - Sep 17, 2020 - Angel Broking

VA Tech Wabag - Uphill task ahead; dilution at discount valuation - ICICI Securities

Polymer price tracker - PVC price hikes continue unabated - ICICI Securities

Brigade Enterprises - Resilience amid turbulence - ICICI Securities

Apollo Hospitals Enterprises - Recovering well from COVID-19 impact - ICICI Securities

NTPC - Sustainability targets encouraging - ICICI Securities

Gladiator Stocks - Oberoi Realty - ICICI Securities

Gladiator Stocks - Automotive Axles - ICICI Securities

Quant Pick - IDFC First Bank - ICICI Securities

Company Update - Jammu & Kashmir Bank - ICICI Securities

India Aviation Data - August 2020 - Angel Broking

Shree Cement - Higher volumes to offset lower prices - ICICI Securities

Apollo Hospitals - Q1FY21 Result Update - ICICI Securities

Refining & marketing - Oil price fall boosted GRMs, to push marketing margins up - ICICI Securities

Mr. Deepak Jasani, Head of Retail Research views on FICCI National Executive Committee Meeting with Reserve Bank of India Governor Shaktikanta Das

India trade deficit for August 2020 - Angel Broking

Chemcon Chemicals IPO - Mr. Keshav Lahoti - Associate Equity Analyst, Angel Broking Ltd

CAMS IPO - Mr. Jaikishan Parmar - Sr. Equity Research Analyst, Angel Broking Ltd

August 2020 Trade Data - Acuité Ratings & Research

Wim Plast - Q1FY21 Result Update - ICICI Securities

Company Update - Mishra Dhatu Nigam - ICICI Securities

Stock Tales - Laurus Labs - ICICI Securities

Stock Tales - Granules India - ICICI Securities

Stock of the day - Chalet Hotel - Target INR 200 - Angel Broking

Upgrade to ADD on Dr. Reddy's Labs - Improved visibility in the US business - HDFC Securities

Monetary Policy post CPI inflation numbers for August 2020 - Angel Broking

HUDCO - Q1FY21 Result Update - Angel Broking

Update on Steriscience pharma - Angel Broking

Covid-19 vaccine development by AstraZeneca - Angel Broking

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019