Bajaj Auto Ltd (NSE:BAJAJ-AUTO) (BSE:532977)

Bajaj Auto Limited is an India-based automotive company. The Company is a manufacturer of scooters, motorcycles and three-wheeler vehicles and spare parts. The Company operates in two segments: Automotive and Investments. The Company’s brands include Pulsar, Avenger, Discover, Platina and Ninja. Its commercial vehicles range include goods carriers, such as GC Max Diesel, GC Max CNG, RE600, and passenger carriers, such as RE 2S, RE 2S CNG, RE 2S LPG, RE 4S, RE 4S CNG, RE 4SLPG, RE Diesel, RE GDI and Mega Max. Bajaj Auto's has in all three plants, two at Waluj and Chakan in Maharashtra and one plant at Pant Nagar in Uttranchal, western India. The Company’s subsidiaries include Bajaj Auto International Holdings BV and PT. Bajaj Auto Indonesia.

Official website: www.bajajauto.com

Operating performance misses estimates; other income boosts profitability: Bajaj Auto (BJAUT)’s 1QFY2016 results have come in marginally below our estimates on the operating front. However, higher other income boosted profitability, leading the net profit to come in ahead of our estimates. Revenues grew 7% yoy to Rs5,613cr, which is lower than our expectation of Rs6,058cr. Volumes grew 3% yoy, led by recovery in the motorcycle segment. Realisation/vehicle grew 4% yoy but declined by 9% on a sequential basis. Realisation/vehicle at Rs55,412 was lower than our estimate owing to higher proportion of entry level bikes in the sales mix. Operating margin, at 20.3%, was broadly in line with our expectation. However, given the lower revenues, the operating profit, at Rs1,140cr, missed our estimate of Rs1,193cr. Other income, at Rs437cr, almost doubled yoy, thus boosting profitability. Net Profit, at Rs1,015cr, beat our estimates of Rs952cr. Outlook and valuation: The domestic two-wheeler industry is likely to remain under pressure in FY2016 on account of slowdown in rural demand. Unseasonal rains, which have led to crop damage, have impact rural incomes and in turn rural demand. BJAUT, however is expected to outperform the industry and regain market share on back of new launches across the motorcycle segments viz commuter, executive and premium. However, given the recent correction in the crude prices is likely to impact the demand in the key export geographies where crude is the major income source. Also, further price cuts in exports to boost volumes and deteriorating product mix would more than offset the benefits from increased dollar realization, thereby keeping margins in check. We expect BJAUT to report revenue and PAT CAGR of 12% and 16%, respectively, over FY2015- 2017. We have retained our earnings estimates and maintain our Neutral rating on the stock with fair value of Rs2,454.

Source: http://www.angelbroking.com