Chakan is important as it contributes ~25% of Bajaj Autos 2W capacity (annual production capacity is 1.2 million bikes and FY13 production was ~880,000 units). This represents ~22% of Bajajs overall vehicle capacity (5.4 million in FY13) and ~21% of FY13 production volumes (2- and 3-wheeler).
We estimate that unit sales from this plant accounted for ~25% of Bajajs FY13 net sales and a higher proportion of profits, given higher realisation (and margin) products are produced in this plant. A prolonged shutdown could result in downside risk to our estimates.
We remain neutral on Bajaj Auto and assign a target price of R1,945, which is based on 15x Q2FY14e EPS. Our 15x multiple is in line with the average of the past two years. It should be well supported by earnings growth of around 16% CAGR over FY13-FY15e.