Bajaj Auto Ltd. - Adequate cushion to volume risk, Retain BUY - Emkay

CMP: Rs1,600
Target Price: Rs2,200

- CMP implying flat EBITDA YoY in FY13 (~17% drop vs our est.) or ~18% drop in val. multiples. Attribute this to excessive focus on volumes

- Valuations ignoring strong FCF (~15% of sales), diversified product mix (not more than 36% cont. from single franchise), high margin profile, EPS upgrades (currency/mix/RM prices)

- Exports can continue to surprise positively. SOTP valuation with lower multiple for exports (~7x EV/EBIDTA vs ~11.5x domestic) yields TP of Rs 1,926

- Our FY12E/13E EPS is ~6%/9% above consensus. Factor in USD/Re at 47 for FY13 est. Valuing the stock at EV/EBIDTA of 11.4x and P/E of ~17x our FY13 estimates, Retain BUY.

Source : Equity Bulls

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