Bajaj Auto’s Q4 FY15 numbers came above our expectations on the back of strong realizations despite a weak volume growth. The topline dropped by just 4% y-o-y and by 16% q-o-q to R46.2 bn. This was much better than the volume performance at 16.4% yoy and 20.5% qoq fall. The company sold 7.82 lakh units in Q4 in a weak domestic market environment. Net realisations growth lifted the overall performance as they grew by 5.4% q-o-q and 15% y-o-y on the back of good exports performance during the quarter, which reached 46% of total volumes and a better product mix in the form of new Pulsar launches which took place in Q4.
With the new launches of Platina CT 100 and couple of Pulsars, the company seems to be having a re-look at their strategy in a serious manner. The initial response for these models has been good and we expect with the kind of aggressive pricing and the better mileage associated with CT 100 it will be a success for them. Lesser exposure to rural markets is virtually insulating the company from the risks existing there currently. Market share gains are on the cards as we expect Bajaj to outperform the otherwise lackluster 2-wheeler industry in FY16.
We upgrade the stock from Neutral to Outperformer with a target price of R2,566, valued at 16x FY17e earnings.
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