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Bajaj Auto, 1Q FY 2014

Bajaj Auto, 1Q FY 2014

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Published by Angel Broking
23rd July, 2013
23rd July, 2013

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Categories:Types, Business/Law
Published by: Angel Broking on Jul 26, 2013
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Please refer to important disclosures at the end of this report
 1 
Y/E March (
`
cr) 1QFY14 1QFY13
% chg (yoy)
4QFY13
% chg (qoq)
Net Sales 4,911 4,866
0.9
4,746
3.5
EBITDA 907 872
 4.0
837
8.4EBITDA Margin (%) 18.5 17.9 55bp 17.6 84bp Adj. EBITDA Margin* (%) 20.4 17.9 250bp 17.6 279bp
Net profit 738 718
2.7
766
(3.7)
Adj. net profit* 834 718
16.0
766
8.9
 Source: Company, Angel Research; Note: * after adjusting for a notional forex loss of 
96cr
Bajaj Auto’s (BJAUT) 1QFY2014 results were broadly in line with our expectations,driven by a 9.7% yoy (18% qoq) growth in exports revenue, which was aided by arobust growth in exports realization. The results exceeded expectations by a widemargin after adjusting for a notional loss of
 ` 
96cr (to be reversed over the tenureof the contract) related to range forward option contracts. While volume growth inthe domestic and export markets is expected to remain under pressure in2QFY2014 due to slowdown in demand, we expect a gradual revival in domesticdemand from 3QFY2014 driven by better monsoons and opening up ofthree-wheeler (3W) permits in Hyderabad and Maharashtra. Additionally, thecompany is expected to benefit from the INR depreciation against the USD whichwill aid EBITDA margin expansion in our view. While the company realized
 ` 
55.56/ USD in 1QFY2014 (
 ` 
49.7/ USD in FY2013), the forward hedges for theremaining nine months of FY2014 are in the range of
 ` 
55-
 ` 
64/ USD. We broadly retain our earnings estimates for the company for FY2014/15
and maintain ourAccumulate rating on the stock.Exports drive 1QFY2014 performance:
For 1QFY2014, the top-line grew by 0.9%yoy (3.5% qoq) to
 ` 
4,911cr, driven by a strong growth of 12.4% yoy (3.6% qoq)in net average realization which was primarily on the back of favorable rates onthe forex hedges. While exports revenue in USD terms declined by ~3% yoy;INR depreciation versus the USD led to a strong growth of 9.7% yoy (18% qoq) inINR terms. EBITDA margins improved 55bp yoy (84bp qoq) to 18.5%, in-line withour estimate of 18.4%. Margin expansion was primarily driven by betterrealization on the exports front. While raw-material expenditure as a percentageof sales declined 273bp yoy (245bp qoq), other expenditure as a percentage ofsales surged 170bp yoy (140bp qoq) due to a notional loss of
 ` 
96cr related tooutstanding forward rate options. Adjusted for the notional loss, the EBITDA margin exceeded expectations and came in at 20.4%. Net profit stood at
 ` 
738cr(up 2.7% yoy) and was broadly in-line with our estimate of
 ` 
726cr.
Outlook and valuation:
 At
 ` 
1,986, BJAUT is trading at 14.2x FY2015E earnings. We maintain our Accumulate rating on the stock with a target price of
 ` 
2,102,valuing the company at 15x FY2015E earnings.
Key financials (Standalone)
Y/E March (
`
cr) FY2012 FY2013 FY2014E FY2015ENet Sales 19,529 19,997 21,696 25,239
% chg 19.1 2.4 8.5 16.3
Net Profit 3,138 3,044 3,451 4,056
% chg 20.0 (3.0) 13.4 17.5
EBITDA (%) 19.0 18.2 19.2 19.3
EPS (
`
) 108.4 105.2 119.3 140.2
P/E (x) 18.3 18.9 16.6 14.2P/BV (x) 9.5 7.3 5.8 4.6RoE (%) 57.3 43.7 38.9 36.5RoCE (%) 59.5 46.9 42.9 40.4EV/Sales (x) 2.6 2.5 2.2 1.8EV/EBITDA (x) 13.7 13.9 11.6 9.5
 Source: Company, Angel Research
 
ACCUMULATE
CMP
 ` 
1,986Target Price
 ` 
2,102
Investment Period 12 Months
Stock InfoSectorBloomberg CodeBJAUT@INShareholding Pattern (%)Promoters50.0MF / Banks / Indian Fls16.2FII / NRIs / OCBs17.8Indian Public / Others16.0 Abs. (%)3m1yr3yrSensex5.217.511.3Bajaj Auto12.724.859.5Face Value (
 ` 
)BSE SensexNifty Reuters Code1020,1596,032BAJA.BO Automobile Avg. Daily VolumeMarket Cap (
 ` 
cr)Beta52 Week High / Low57,4590.72,229/1,52031,256Net Debt (
 ` 
cr)(4,589)
 
Yaresh Kothari
022-3935 7800 Ext: 6844yareshb.kothari@angelbroking.com
Bajaj Auto
Performance Highlights
1QFY2014 Result Update | Automobile
July 22, 2013
 
 
 
Bajaj Auto |
1QFY2014 Result Update July 22, 20132
Exhibit 1:
 
Quarterly financial performance (Standalone)
Y/E March (
`
cr) 1QFY14 1QFY13
% chg (yoy)
4QFY13
% chg (qoq)
FY2013 FY2012
% chg (yoy)
Net sales 4,911 4,866
0.9
4,746
3.5
19,997 19,529
2.4
Consumption of RM 3,204 3,316
(3.4)
3,160
1.4
13,548 13,351
1.5(% of Sales) 65.2 68.2 66.6 67.7 68.4
Staff Costs 184 160
14.5
167
10.2
639 540
18.4(% of Sales) 3.7 3.3 3.5 3.2 2.8
Purchases of TG 203 192
5.9
249
(18.5)
859 751
14.3(% of Sales) 4.1 3.9 5.2 4.3 3.8
Other expenses 414 326
 27.2
334
 23.8
1,316 1,166
12.8(% of Sales) 8.4 6.7 7.0 6.6 6.0
Total expenditure 4,004 3,994
0.3
3,910
 2.4
16,362 15,809
3.5
Operating profit 907 872
4.0
837
8.4
3,635 3,720
(2.3)
OPM (%) 18.5 17.9 17.6 18.2 19.0 Adj. OPM (%)* 20.4 17.9 17.6 18.2 19.0
Interest 0 0
-
0
-
1 22
-
Depreciation 44 35
 26.0
47
(4.8)
164 146
12.6
Other Income 176 182
(3.5)
244
(27.9)
795 608
30.8
PBT (excl. Extr. Items) 1,038 1,018
1.9
1,033
0.4
4,266 4,160
2.5
Extr. Income/(Expense) 0 0
-
0
-
0 134
-
PBT (incl. Extr. Items) 1,038 1,018
1.9
1,033
0.4
4,266 4,026
6.0
(% of Sales) 21.1 20.9 21.8 21.3 20.6
Provision for Taxation 300 300
0.0
268
12.1
1,223 1,022
19.6(% of PBT) 28.9 29.5 25.9 28.7 25.4
Reported PAT 738 718
2.7
766
(3.7)
3,044 3,004
1.3
Adjusted PAT* 834 718
16.0
766
8.9
3,044 3,138
(3.0)
 Adj. PATM 17.0 14.8 16.1 15.2 15.4
Equity capital (cr) 289.4 289.4 289.4 289.4 289.4
Reported EPS (
`
) 25.5 24.8
2.7
26.5
(3.7)
105.2 103.8
1.3
Adjusted EPS* (
`
) 28.8 24.8
16.0
26.5
8.9
105.2 108.4
(3.0)
 Source: Company, Angel Research; Note: * after adjusting for a notional forex loss of 
96cr
Exhibit 2:
 
1QFY2014 – Actual vs Angel estimates
Y/E March (
`
cr) Actual Estimates
Variation (%)
Net Sales 4,911 4,792
2.5
EBITDA 907 883
 2.6EBITDA margin (%) 17.6 18.6 (97)bp Adj. EBITDA margin (%) 20.4 18.4 198bp
Reported PAT 738 726
1.6
Adjusted PAT 834 726
14.9
 Source: Company, Angel Research
 
 
Bajaj Auto |
1QFY2014 Result Update July 22, 20133
Exhibit 3:
 
Quarterly volume performance
(units) 1QFY14 1QFY13
% chg (yoy)
4QFY13
% chg (qoq)
FY2013 FY2012
% chg (yoy)
Domestic 616,712 663,326
(7.0)
616,237
0.1
2,690,005 2,769,736
(2.9)
Exports 362,563 415,645
(12.8)
365,005
(0.7)
1,547,157 1,579,824
(2.1)
Total volumes 979,275 1,078,971
(9.2)
981,242
(0.2)
4,237,162 4,349,560
(2.6)
Motorcycles
Domestic 571,655 618,489
(7.6)
556,147
 2.8
2,463,863 2,566,757
(4.0)
Exports 288,496 364,134
(20.8)
303,537
(5.0)
1,293,231 1,267,648
 2.0
Total motorcycles 860,151 982,623
(12.5)
859,684
0.1
3,757,094 3,834,405
(2.0)
% of total volumes 87.8 91.1 87.6 88.7 88.2
Three-wheelers
Domestic 45,057 44,837
0.5
60,090
(25.0)
226,142 202,979
11.4
Exports 74,067 51,511
 43.8
61,468
 20.5
253,926 312,176
(18.7)
Total three-wheelers119,124 96,348
23.6
121,558
(2.0)
480,068 515,155
(6.8)
% of total volumes 12.2 8.9 12.4 11.3 11.8
 Source: Company, Angel Research
Strong growth in export realization drives top-line: 
For 1QFY2014, the top-linegrew by 0.9% yoy (3.5% qoq) to
 ` 
4,911cr led by a better-than-expected growth of12.4% yoy (3.6% qoq) in net average realization. The net average realizationgrew on the back of favorable rates on the forex hedges (the company realized
 ` 
55.56/ USD in 1QFY2014 as against
 ` 
49.7/ USD in FY2013) and also due toprice hikes taken since 1HFY2013. While exports revenue in USD terms declinedby 3% yoy; INR depreciation versus the USD led to a strong growth of 9.7% yoy (18% qoq) in INR terms. The growth in exports revenue was led by an impressivegrowth of 25.8% yoy (18.8% qoq) in net average realization inspite of the volumeshaving posted a decline of 12.8% yoy (flat qoq). Domestic revenues on the otherhand reported a decline of 2.4% yoy (4.2% qoq) led by a 7% yoy (flat qoq) declinein volumes.Total volumes declined by 9.2% yoy (flat qoq) on account of slowdown in domesticmotorcycle demand. During the quarter, motorcycle volumes in the domestic andexport markets declined by 7.6% (up 2.8% qoq) and 20.8% yoy (5% qoq)respectively. The strike at the Chakan plant impacted motorcycle volumes(loss of ~20,000 units) to some extent. However, three-wheeler volumes registereda strong growth of 23.6% yoy (down 2% qoq) driven largely by the exports whichgrew by 43.8% yoy (20.5% qoq).

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