Higher raw material costs impact Bajaj Auto's Q1 Result: Angel Broking

Views of Mr. Shrikant Akolkar (Research Analyst- Auto & Auto Ancillary, Angel Broking):

"Bajaj Auto reported mix set of numbers in 1QFY18 with revenue and EBITDA below the consensus estimates by 1.5% and 13% respectively. Profit after tax however beat the consensus estimates by 2%; this was mainly aided by YoY 71% jump in the other income to INR 457cr. Overall net sales and PAT declined by 5% (YoY) and 6% (YoY) respectively to INR 5,442cr and INR 524cr. EBITDA was at INR 938cr, declining 20% (YoY) due to sharp increase in the raw material costs. EBITDA margin was at 17.2% vs. 18.5% in 4QFY17 and 20.5% in 1QFY17. While YoY PAT decline at 5.5% was less than decline in operating profit, this was due by the steep increase in other income. During the quarter, company incurred INR 32cr expenses to compensate the losses incurred by dealers on account of GST implementation. Adjusted for this, PAT is at INR 956cr.

Blended realization was at INR 59,976 showing a YoY growth of 5.7% and QoQ decline of 1.7%. Raw material cost per vehicle grew by 10% YoY showing steep increase in the raw material prices. Company has indicated that due to the lower sales volumes in the quarter, it had to absorb the overheads in the first quarter which led to the decline in the operating performance and expects a better performance in second quarter of this fiscal.

The stock is currently trading at 16.3% of FY19E earnings. We have an ACCUMULATE rating on the stock with price target of INR 3,067."

Shares of BAJAJ AUTO LTD. was last trading in BSE at Rs.2815 as compared to the previous close of Rs. 2818.65. The total number of shares traded during the day was 25394 in over 2214 trades.

The stock hit an intraday high of Rs. 2838 and intraday low of 2806.8. The net turnover during the day was Rs. 71599390.

Source : Equity Bulls

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