2QFY2013 Result Update | Automobile

October 19, 2012

Bajaj Auto
Performance Highlights
Y/E March (` cr) Net Sales EBITDA EBITDA Margin (%) Adj. net profit 2QFY13 4,972 915 18.4 741 2QFY12 5,185 975 18.8 821 % chg (yoy) (4.1) (6.2) (41)bp (9.8) 1QFY13 4,866 872 17.9 718 % chg (qoq) 2.2 5.0 49bp 3.1

NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Automobile 51,224 (5,702) 0.6 1,850/1,410 44,735 10 18,682 5,684 BAJA.BO BJAUT@IN

`1,770 -

Source: Company, Angel Research

Bajaj Auto (BJAUT) registered an in-line operating performance for 2QFY2013; however, its net profit was sharply ahead of our estimates driven by higher-than-expected other income and a slightly lower tax rate. We expect the volume growth of the company to revive in 2HFY2013E driven by recovery in export volumes (post price rationalization in Sri Lanka) and also due to the success of new launches (Pulsar 200NS and Discover 125ST). We broadly retain our earnings estimates for the company. Due to limited upside from the current levels, we maintain our Neutral rating on the stock. In-line operating performance: BJAUTs top-line for 2QFY2013 recorded a decline of 4.1% yoy (up 2.2% qoq) which was on the expected lines and was on account of a 9.9% yoy (2.8% qoq) decline in total volumes. The net average realization however, registered an increase of 7.1% yoy (5.1% qoq) driven by an 8.7% (6.6% qoq) and 4.4% yoy (2% qoq) increase in domestic and export realization, respectively. The EBITDA margin contracted by 41bp yoy to 18.4% (in-line with our estimates) mainly due to increase in other expenditure and employee expense as a percentage of sales by 80bp and 40bp, respectively. Other expenditure was higher as the company took a hit of `12cr on unrealized forex hedges. Further, a higher share of less-than-125cc motorcycles (~72% vs 66% in 2QFY2012) also impacted margins adversely. The adjusted net profit, recorded a decline of 9.8% yoy primarily due to a reduction in income tax benefits at the Pantnagar plant (tax rate of 28.8% vs 25.7% in 2QFY2012). Nonetheless, it was ahead of our estimates by 10.3% driven by higher-than-expected other income and a slightly lower tax rate. Outlook and valuation: At `1,770, BJAUT is trading at 14.4x FY2014E earnings. We maintain our Neutral rating on the stock.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 50.0 18.5 15.5 16.0

Abs. (%) Sensex Bajaj Auto

3m 8.1 14.3

1yr 9.4

3yr 7.8

8.2 137.1

Key financials (Standalone)

Y/E March (` cr) Net Sales % chg Net Profit % chg EBITDA (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2011 16,398 37.6 2,750 54.1 18.7 95.0 18.6 10.4 70.2 60.0 2.8 15.2

FY2012 19,529 19.1 3,082 12.1 18.4 106.5 16.6 8.5 56.3 57.3 2.3 12.5

FY2013E 21,121 8.2 3,145 2.0 18.4 108.7 16.3 6.7 46.2 51.6 2.0 11.1

FY2014E 23,642 11.9 3,548 12.8 18.5 122.6 14.4 5.4 41.6 47.2 1.7 9.5

Yaresh Kothari
022-3935 7800 Ext: 6844 yareshb.kothari@angelbroking.com

Please refer to important disclosures at the end of this report

Bajaj Auto | 2QFY2013 Result Update

Exhibit 1: Quarterly financial performance (Standalone)

Y/E March (` cr) Net Sales Consumption of RM (% of Sales) Staff Costs (% of Sales) Purchases of TG (% of Sales) Other Expenses (% of Sales) Total Expenditure Operating Profit OPM (%) Interest Depreciation Other Income PBT (excl. Extr. Items) Extr. Income/(Expense) PBT (incl. Extr. Items) (% of Sales) Provision for Taxation (% of PBT) Reported PAT Adj PAT Adj. PATM Equity capital (cr) Reported EPS (`) Adjusted EPS (`)
Source: Company, Angel Research

2QFY2013 2QFY2012 4,972 3,356 67.5 153 3.1 213 4.3 335 6.7 4,057 915 18.4 41 167 1,041 0 1,041 20.9 300 28.8 741 741 14.9 289.4 25.6 25.6 5,185 3,563 68.7 139 2.7 199 3.8 308 5.9 4,210 975 18.8 20 39 156 1,072 95 977 18.8 251 25.7 726 821 14.0 289.4 25.1 28.4

% chg (yoy) 1QFY2013 (4.1) (5.8) 10.0 6.6 8.8 (3.6) (6.2) 4.1 6.6 (2.9) 6.5 19.5 2.0 (9.8) 4,866 3,316 68.2 160 3.3 192 3.9 326 6.7 3,994 872 17.9 35 182 1,018 0 1,018 20.9 300 29.5 718 718 14.8 289.4 2.0 (9.8) 24.8 24.8

% chg (qoq) 1HFY2013 1HFY2012 2.2 1.2 (4.5) 10.9 3.0 1.6 5.0 16.5 (8.4) 2.2 2.2 0.0 3.1 3.1 9,838 6,672 67.8 314 3.2 404 4.1 661 6.7 8,051 1,787 18.2 76 349 2,059 2,059 20.9 600 29.1 1,459 1,459 14.8 289.4 3.1 3.1 50.4 50.4 9,892 6,853 69.3 282 2.9 376 3.8 566 5.7 8,076 1,815 18.4 20 70 300 2,025 95 1,930 19.5 493 25.5 1,437 1,532 14.5 289.4 49.7 53.0

% chg (yoy) (0.5) (2.6) 11.1 7.6 16.8 (0.3) (1.6) 8.9 16.0 1.7 6.7 21.7 1.5 (4.8)

1.5 (4.8)

Exhibit 2: 2QFY2013 Actual vs Angel estimates

Y/E March (` cr) Net Sales EBITDA EBITDA margin (%) Adj. PAT
Source: Company, Angel Research

Actual 4,972 915 18.4 741

Estimates 4,909 894 18.2 671

Variation (%) 1.3 2.4 20bp 10.3

October 19, 2012

Bajaj Auto | 2QFY2013 Result Update

Exhibit 3: Quarterly volume performance

(units) Domestic Exports Total volumes Motorcycles Domestic Exports Total motorcycles % of total volumes Three-wheelers Domestic Exports Total three-wheelers % of total volumes
Source: Company, Angel Research

2QFY2013 658,923 390,285 1,049,208 601,876 326,648 928,524 88.5 57,047 63,637 120,684 11.5

2QFY2012 740,003 424,134 1,164,137 684,671 342,686 1,027,357 88.3 55,332 81,448 136,780 11.7

% chg (yoy) (11.0) (8.0) (9.9) (12.1) (4.7) (9.6)

1QFY2013 663,326 415,645 1,078,971 618,489 364,134 982,623 91.1

% chg (qoq) (0.7) (6.1) (2.8) (2.7) (10.3) (5.5)

1HFY2013 1,322,249 805,930 2,128,179 1,220,365 690,782 1,911,147 89.8

1HFY2012 1,405,454 851,498 2,256,952 1,307,846 682,562 1,990,408 88.2 97,608 168,936 266,544 11.8

% chg (yoy) (5.9) (5.4) (5.7) (6.7) 1.2 (4.0)

3.1 (21.9) (11.8)

44,837 51,511 96,348 8.9

27.2 23.5 25.3

101,884 115,148 217,032 10.2

4.4 (31.8) (18.6)

Top-line down 4.1% yoy: BJAUTs top-line for 2QFY2013 recorded a decline of 4.1% yoy (up 2.2% qoq) which was on the expected lines and was on account of a 9.9% yoy (2.8% qoq) decline in total volumes. While domestic volumes (down 11% yoy) were impacted due to the slowdown in the domestic motorcycle segment; export volumes (down 8% yoy) declined due to lower dispatches to Sri Lanka led by hike in import duty. The net average realization though, registered an increase of 7.1% yoy (5.1% qoq) driven by an 8.7% and 4.4% yoy increase in domestic and export realization, respectively. As a result, domestic and export revenues recorded a decline of 3.2% (up 5.9% qoq) and 3.9% yoy (4.2% qoq), respectively. Led by the success of the new launches, BJAUT increased its market share in the domestic motorcycle segment from 23% in April 2012 to 27% in September 2012. The companys market share including exports stood at 33% as of 2QFY2013.

Exhibit 4: Sluggish growth in volumes

(units) 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0
17.0 17.2 17.7 16.3 13.6 7.3 (1.3) (9.9) 45.7

Exhibit 5: Net average realization up 7.1% yoy

yoy change (%) (%) 50.0 40.0 30.0 20.0 10.0 0.0 (10.0) (20.0) (`) 47,000 46,000 45,000 44,000 43,000 42,000 41,000 40,000 39,000 2.7 42,543 41,786 8.7 42,959 5.6 41,502 3.1 2.6 42,859 5.8 3.3 5.3 45,004 44,393
Net average realisation yoy change (%)

Total volumes

(%) 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0

45,911

43,694

7.1

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

Source: Company, Angel Research

2QFY13

Source: Company, Angel Research

October 19, 2012

2QFY13

Bajaj Auto | 2QFY2013 Result Update

Exhibit 6: Revenue mix

(%) 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0
27.6 26.2 Domestic Export

Exhibit 7: Domestic market share trend

(%) 45.0 42.1 40.0 35.0 30.0 25.0 20.0
62.8 65.3 64.7 67.3 63.1 65.4

Three-wheelers 38.5 38.6

Motorcycles 38.3 39.9 38.9

Total Two-wheelers 40.9 40.3 41.0

28.1

37.2

34.7

35.3

32.7

36.9

34.6

28.6

25.6

26.1

25.3

26.9

25.0

24.5

23.5

25.7

72.4

71.9

73.8

15.0 10.0 5.0 0.0

21.9

19.6

19.9

19.6

20.2

18.8

17.9

17.6

18.5

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

Source: Company, Angel Research

Source: Company, SIAM, Angel Research

EBITDA margin at 18.4%: On the operating front, the EBITDA margin contracted by 41bp yoy to 18.4% (in-line with our estimates) mainly due to increase in other expenditure and employee expense as a percentage of sales by 80bp and 40bp, respectively. Further, a higher share of less-than-125cc motorcycles (~72% vs 66% in 2QFY2012) also impacted margins adversely. Other expenditure was higher as the company took a hit of `12cr on unrealized forex hedges. On a sequential basis, EBITDA margins improved by 50bp driven by a better product mix and a 5.1% qoq increase in the net average realization.

Exhibit 8: EBITDA margins at 18.4%

(%) 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 20.7 20.3 19.4 17.8 18.8 19.7 19.8 17.9 18.4 73.5 74.0 73.9 76.4 75.4 73.6 73.4 74.4 74.1
EBITDA margin Raw material cost/sales

Exhibit 9: High other income benefits bottom-line

(` cr) 850 800 750 700 650 600
682 667 676 711 726 795 772 718 741 Net profit (LHS) Net profit margin (RHS)

15.7

16.0

16.3

16.6 15.9 15.1 14.0 14.8 14.9

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

Source: Company, Angel Research

2QFY13

Source: Company, Angel Research

Higher other income benefits bottom-line: For 2QFY2013, the adjusted net profit recorded a decline of 9.8% yoy to `741cr, primarily due to reduction in income tax benefits from the Pantnagar plant (tax rate of 28.8% as against 25.7% in 2QFY2012). Nonetheless, the adjusted net profit was ahead of our estimates by 10.3% driven by higher-than-expected other income and a slightly lower tax rate. Other income benefited from gains (`60cr) related to the reversal of time value of forex hedges.

October 19, 2012

2QFY13

2QFY13
(%) 17.0 16.5 16.0 15.5 15.0 14.5 14.0 13.5 13.0 12.5

Bajaj Auto | 2QFY2013 Result Update

Conference call Key highlights

The management has scaled down its guidance for the industry volume growth for FY2013 to 3-4% from 7-8% earlier. The festival season so far has been flat to marginally positive according to the management. The company expects three-wheeler domestic demand to remain under pressure and expects monthly sales of 17,000-18,000 units without new permits and around 22,000-23,000 with permits. Recently new permits have been issued in New Delhi (~10,000) and Hyderabad (~20,000). Net average USD/INR rate for exports realization stood at `48.81 as against `49.8 in 1QFY2013. BJAUT has hedged 90-95% of its estimated exports for FY2013 at a rate of `48-51/USD. The management has started taking hedges for FY2014 and has hedged up to US$600mn of exports at a lower band of `53/USD. The company indicated that the recently launched Discover 125 ST and Pulsar 200NS are clocking monthly sales of ~34,000 and ~8,000 units, respectively. BJAUT plans to launch a new 100cc motorcycle in January 2013 in the domestic market and RE60 (four-wheeler) in 1QFY2014 in Sri Lanka. The company has increased product prices by `500-`1,000 across twowheeler and three-wheeler models in July 2012. BJAUT has further hiked the prices of three-wheelers in the domestic market by `1,000-`1,500. It has also increased the price by `750 for Discover 125ST and `200 for other Discover models. The company has not taken any price hike on Pulsar models. BJAUT will pass on 75-80% of the duty drawback rate cut (rates lowered to 2% from 5.5% earlier) from November 1, 2012. BJAUT plans to spend `500cr in capex over the next two years (excluding `265cr on purchase of a new aircraft).

October 19, 2012

Bajaj Auto | 2QFY2013 Result Update

Investment arguments
Strong focus on Discover and Pulsar to improve market share: BJAUT has witnessed slight moderation in demand in the domestic market recently due to increased competitive activity and slowdown in the industry. However, BJAUT continues to focus on its core brands, Discover and Pulsar. The successful launches of Discover 100cc and 125cc bikes have helped BJAUT to maintain its market share at 25-27% in the domestic motorcycle market. Further, launch of the Discover 125ST and Pulsar 200NS is expected to help BJAUT in retaining its strong volume momentum. The company is positioning itself in-line with its strategy of value and price products, wherein it proposes to tap the higher-value bike segments, which have a high-growth potential and fetch better realizations. Three-wheelers registering healthy growth: BJAUT has a strong presence in the three-wheeler market, with an overall market share (including exports) of ~60%. The company tops the passenger auto-rickshaw segment (~66% market share), which accounts for ~85% of the three-wheeler market. The three-wheeler segment fetches higher margins than the companys two-wheeler business. Although competition in the domestic three-wheeler space is intense, strong export volume growth has helped BJAUT to post higher volumes. As a result, we expect the companys three-wheeler volumes to grow by 7-8% over FY2012-14E. Growth potential in export markets: BJAUT registered a strong exports CAGR of ~29% during FY2007-12, aided by a ~33% CAGR in two-wheeler exports and a ~17% CAGR in three-wheeler exports. Going ahead, we estimate BJAUT to register 10-12% exports revenue CAGR over FY2012-14E, driven by sustained demand from the export markets. BJAUT has hedged 90-95% of its FY2013 exports at a USD-INR rate of `48-51. The recent sharp depreciation of the INR against the USD is expected to further aid exports profitability.

Outlook and valuation

We expect the volume growth of the company to revive in 2HFY2013E driven by recovery in export volumes (post price rationalization in Sri Lanka) and also due to the success of new launches (Pulsar 200NS and Discover 125ST). We broadly retain our earnings estimates for the company.

Exhibit 10: Change in estimates

Y/E March Net Sales (` cr) OPM (%) EPS (`) Earlier Estimates 21,285 18.2 108.5 23,927 18.3 121.3 Revised Estimates 21,121 18.4 108.7 23,642 18.5 122.6 % chg (0.8) 17bp 0.2 (1.2) 20bp 1.1 FY2013E FY2014E FY2013E FY2014E FY2013E FY2014E

Source: Company, Angel Research

At `1,770, BJAUT is trading at 14.4x FY2014E earnings. Due to limited upside from the current levels, we maintain our Neutral rating on the stock.

October 19, 2012

Bajaj Auto | 2QFY2013 Result Update

Exhibit 11: Key assumptions

Y/E March Total volume (units) Domestic Export Total motorcycle Scooters Total two-wheelers Passenger domestic Goods domestic Exports Total three-wheelers Total change (%) Total volume Domestic Export Total motorcycle Scooters Total two-wheelers Passenger domestic Goods domestic Exports Total three-wheelers
Source: Company, Angel Research

FY2010 2,851,518 1,781,748 725,097 2,506,845 3,737 2,510,582 164,493 11,534 164,909 340,936 30.0 39.6 14.8 31.4 (68.3) 30.8 31.3 13.1 18.6 24.2

FY2011 3,823,954 2,414,606 972,437 3,387,043 27 3,387,070 201,246 4,357 231,281 436,884 34.1 35.5 34.1 35.1 34.9 22.3 (62.2) 40.2 28.1

FY2012 4,349,560 2,566,757 1,267,648 3,834,405 3,834,405 195,141 7,838 312,176 515,155 13.7 6.3 30.4 13.2 13.2 (3.0) 79.9 35.0 17.9

FY2013E 4,491,881 2,643,760 1,356,383 4,000,143 4,000,143 210,752 6,270 274,715 491,738 3.3 3.0 7.0 4.3 4.3 8.0 (20.0) (12.0) (4.5)

FY2014E 4,899,659 2,775,948 1,573,405 4,349,352 4,349,352 227,612 6,772 315,922 550,307 9.1 5.0 16.0 8.7 8.7 8.0 8.0 15.0 11.9

Exhibit 12: Angel vs consensus forecast

Angel estimates FY13E Total op. income (` cr) EPS (`) 21,121 108.7 FY14E 23,642 122.6 Consensus FY13E 21,076 110.0 FY14E 24,315 129.7 Variation (%) FY13E 0.2 (1.1) FY14E (2.8) (5.5)

Source: Bloomberg, Angel Research

Exhibit 13: One-year forward P/E band

(`) 2,500 2,000 1,500 1,000 500 0 Share Price (`) 6x 10x 14x 18x

Exhibit 14: One-year forward P/E chart

(x) 60.0 Absolute P/E Five-yr average P/E

BJAUT de-merged

50.0 40.0 30.0 20.0 10.0 0.0

Dec-10

Aug-05

Dec-05

Jan-10

Mar-09

Aug-07

Apr-08

Apr-04

Nov-11

Mar-10

Oct-03

Oct-12

Jan-11

Nov-11

Oct-06

May-07

Feb-05

Sep-04

Source: Company, Angel Research

Source: Company, Angel Research

October 19, 2012

May-09

Oct-12

Jul-06

Jul-08

Bajaj Auto | 2QFY2013 Result Update

Exhibit 15: BJAUT Premium/Discount to Sensex P/E

(%) 250 200 150 100 50 0 (50) (100) Absolute premium Five-yr average premium

Exhibit 16: Two-wheeler stock performance vs Sensex

TVSL 500 450 400 350 300 250 200 150 100 50 0 HMCL BJAUT Sensex

Mar-08

Mar-09

Mar-10

Mar-11

Apr-12

Feb-05

Sep-08

Sep-09

Sep-10

May-09

Dec-05

Aug-07

Mar-10

Nov-11

Source: Company, Angel Research

Source: Company, Angel Research

Exhibit 17: Automobile - Recommendation summary

Company Ashok Leyland Bajaj Auto Hero MotoCorp Maruti Suzuki Mahindra & Mahindra Tata Motors TVS Motor Reco. Buy Neutral Accumulate Neutral Accumulate Buy Accumulate CMP Tgt. price (`) (`) 23 1,770 1,849 1,369 823 269 43 30 2,077 944 316 49 Upside (%) 29.2 12.3 14.7 17.6 14.1 P/E (x) FY13E 10.7 16.3 15.1 20.6 16.4 6.9 9.1 FY14E 8.5 14.4 13.8 14.8 14.6 6.0 7.9 EV/EBITDA (x) FY13E 5.5 11.1 8.0 9.8 9.1 3.8 3.0 FY14E 4.7 9.5 6.5 6.8 7.7 3.2 2.5 RoE (%) FY13E 13.3 46.2 49.6 12.0 22.6 32.6 17.9 FY14E 15.6 41.6 42.2 14.8 21.5 28.8 18.1 FY12-14E EPS CAGR (%) 14.1 7.3 11.2 35.3 9.8 11.6 1.7

Source: Company, Angel Research

Company background
Bajaj Auto (BJAUT) is the second largest 2W manufacturer in the country (~26% market share) and a market leader in the 3W segment (~55% market share). BJAUT has three manufacturing facilities in India, located at Waluj, Chakan and Pantnagar, with a total installed capacity (2W - 4.5mn and 3W - 0.6mn) of 5.1mn units. BJAUT also happens to be one of India's largest auto exporters, with exports forming ~33% of revenue (~36% of total volumes) in FY2011. Led by two dominant brands, Discover and Pulsar (~65% of motorcycle volumes), BJAUT reported a strong 25.6% volume CAGR over FY2009-12.

October 19, 2012

Sep-11

Apr-04

Oct-06

Jan-11

Oct-12

Oct-12

Jul-08

Bajaj Auto | 2QFY2013 Result Update

Profit and loss statement (Standalone)

Y/E March (` cr) Total operating income % chg Total expenditure Net raw material costs Other mfg costs Employee expenses Other EBITDA % chg (% of total op. income) Depreciation & amortization EBIT % chg (% of total op. income) Interest and other charges Other income (% of PBT) Recurring PBT % chg Extraordinary income/(exp.) Tax (% of PBT) PAT (reported) ADJ. PAT % chg (% of total op. income) Basic EPS (`) Adj. EPS (`) % chg FY2009 FY2010 FY2011 FY2012 8,810 (2.3) 7,829 6,463 192 538 635 982 (15.7) 11.1 130 852 (14.0) 10.1 21 122 14.6 953 (15.9) (115) 299 35.6 655 769 (4.9) 9.1 26.6 26.6 (4.9) 11,921 35.3 9,515 8,070 214 583 648 2,406 145.0 20.2 136 2,269 166.3 19.7 6 144 5.8 2,408 152.6 (82) 705 28.3 1,703 1,784 132.0 15.5 58.8 61.7 132.0 16,398 37.6 13,329 11,798 253 477 802 3,069 27.6 18.7 123 2,946 29.8 18.5 2 1,403 37.3 4,348 80.6 590 1,008 26.8 3,340 2,750 54.1 17.3 115.4 95.0 54.1 19,529 19.1 15,943 14,103 327 515 998 3,586 16.8 18.4 146 3,440 16.8 18.2 22 608 15.4 4,026 (7.4) (78) 1,022 25.9 3,004 3,082 12.1 16.3 103.8 106.5 12.1 FY2013E 21,121 8.2 17,232 15,277 329 576 1,049 3,889 8.5 18.4 157 3,733 8.5 18.1 2 699 15.8 4,430 10.0 1,285 29.0 3,145 3,145 2.0 15.3 108.7 108.7 2.0 FY2014E 23,642 11.9 19,259 17,097 347 659 1,156 4,383 12.7 18.5 167 4,217 13.0 18.2 2 783 15.7 4,998 12.8 1,449 29.0 3,548 3,548 12.8 15.3 122.6 122.6 12.8

October 19, 2012

Bajaj Auto | 2QFY2013 Result Update

Balance sheet statement (Standalone)

Y/E March (` cr) SOURCES OF FUNDS Equity share capital Reserves & surplus Shareholders Funds Total loans Deferred tax liability Other long term liabilities Long term provisions Total Liabilities APPLICATION OF FUNDS Gross block Less: Acc. depreciation Net Block Capital work-in-progress Investments Long term loans and adv. Other noncurrent assets Current assets Cash Loans & advances Other Current liabilities Net current assets Misc. exp. not written off Total Assets 3,350 1,808 1,542 22 1,809 2,325 137 1,491 697 2,438 (112) 183 3,444 3,379 1,900 1,480 42 4,022 1,584 101 797 686 2,858 (1,274) 4,269 3,395 1,912 1,483 70 4,722 227 402 2,344 229 992 1,123 3,698 (1,353) 5,550 3,396 1,914 1,482 42 4,883 580 1 4,094 1,654 1,043 1,397 4,625 (532) 6,456 3,642 2,071 1,571 36 4,883 580 1 5,914 3,122 1,235 1,557 4,981 933 8,004 3,879 2,238 1,642 39 4,883 580 1 8,103 5,005 1,387 1,712 5,377 2,727 9,871 145 1,725 1,870 1,570 4 3,444 145 2,784 2,928 1,339 2 4,269 289 4,621 4,910 292 30 194 125 5,550 289 5,752 6,041 97 48 157 112 6,456 289 7,300 7,589 97 48 157 112 8,004 289 9,167 9,456 97 48 157 112 9,871 FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E

Source: Company, Angel Research

October 19, 2012

10

Bajaj Auto | 2QFY2013 Result Update

Cash flow statement (Standalone)

Y/E March (` cr) Profit before tax Depreciation Change in working capital Others Other income Direct taxes paid Cash Flow from Operations (Inc.)/Dec. in fixed assets (Inc.)/Dec. in investments Other income Cash Flow from Investing Issue of equity Inc./(Dec.) in loans Dividend paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in cash Opening Cash balances Closing Cash balances FY2009 FY2010 FY2011 838 130 3 (138) (122) (299) 413 (353) 49 122 (183) 236 339 (723) (149) 81 56 137 2,489 136 790 171 (144) (705) 2,737 (49) (2,213) 144 (2,117) (231) 372 (796) (655) (35) 137 101 3,758 123 974 (830) (1,403) (1,008) 1,614 (44) (700) 1,403 659 145 (1,047) 1,345 (2,588) (2,145) 127 101 229 FY2012 3,948 146 683 (186) (608) (1,022) 2,960 27 (161) 608 474 (194) 1,513 (3,803) (2,484) 950 229 1,179 FY2013E 4,430 157 4 (699) (1,285) 2,607 (240) 699 459 1,597 (1,597) 1,468 1,654 3,122 FY2014E 4,998 167 88 (783) (1,449) 3,021 (240) 783 543 1,681 (1,681) 1,882 3,122 5,005

October 19, 2012

11

Bajaj Auto | 2QFY2013 Result Update

Key ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Int.) (0.2) (0.4) 41 (1.0) (1.2) 379 (0.9) (1.5) 1,743 (1.1) (1.8) 155 (1.0) (2.0) 1,915 (1.0) (2.2) 2,163 2.8 15 14 49 (11) 3.5 12 9 51 (25) 4.8 11 7 49 (33) 5.8 12 8 47 (35) 6.0 13 9 48 (38) 6.3 13 9 47 (34) 26.7 25.8 44.5 58.8 54.5 74.4 60.0 55.4 70.2 57.3 71.6 56.3 51.6 76.5 46.2 47.2 86.6 41.6 10.1 0.6 2.8 18.5 18.5 19.7 0.7 3.2 45.1 45.1 18.5 0.7 3.5 46.9 46.9 18.2 0.7 3.9 52.1 52.1 18.1 0.7 4.4 56.2 56.2 18.2 0.7 4.9 62.8 62.8 26.6 26.6 27.1 11.0 64.6 58.8 61.7 63.6 20.0 101.2 115.4 95.0 119.7 40.0 169.7 103.8 106.5 108.8 45.0 208.8 108.7 108.7 114.1 47.5 262.3 122.6 122.6 128.4 50.0 326.8 66.6 65.3 27.4 0.6 5.6 51.8 14.8 30.1 27.9 17.5 1.1 4.0 20.1 11.3 18.6 14.8 10.4 2.3 2.8 15.2 8.4 16.6 16.3 8.5 2.5 2.3 12.5 6.9 16.3 15.5 6.7 2.7 2.0 11.1 5.4 14.4 13.8 5.4 2.8 1.7 9.5 4.2 FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E

October 19, 2012

12

Bajaj Auto | 2QFY2013 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Bajaj Auto No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

October 19, 2012

13