Positive on Bajaj Auto despite weak results

Updated: May 22 2014, 10:37am hrs
Bajaj Auto reported weaker-than-expected Ebitda and PAT at R930 crore and R760 crore, respectively, in 4QFY14, led by higher-than-expected other expenses.

We retain our positive outlook on the stock as we believe the company will likely stem further market-share loss in the domestic market and gain from strong growth momentum in export revenues.

Valuations remain attractive at 12.4X March 2016E EPS in view of strong revenue growth potential and stable operating margins at 20%+ levels. We will review our earnings estimates after the result concall.

Bajaj Auto reported net sales (including other operating income) at R4,930 crore (+1.9% y-o-y, -3.9% q-o-q), modestly higher than our estimate of R4,870 crore. However, Ebitda and PAT at R930 crore and R760 crore were ~4-5% below our estimates, led by higher-than-expected other expenses at R390 crore (+17% y-o-y, +60% q-o-q) due to MTM loss of R36.97 crore. Adjusted Ebitda margin was relatively stable at 19.6% in 4QFY14 vs 20.3% in 3QFY14.

We highlight that export sales volumes for the company have rebounded over the past three quarters. In 4QFY14, export volumes increased by 9% y-o-y while export revenues grew ~30% y-o-y, boosted by increase in export sales and improvement in average export realizations (~19% y-o-y in our view) led by higher rupee realizations and improving product mix.

Kotak Institutional Equities