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Bajaj Auto 1QFY22 first cut & call highlights (Rating: NOT RATED) - YES Securities

Posted On: 2021-07-25 07:19:03 (Time Zone: UTC)

Margins miss, Revenues and PAT in-line to street

- Revenues declined 14% QoQ (+139% YoY) to Rs73.9b (in-line to Bloom cons est (BE)) led by volume decline of 14% QoQ while realizations remained flat QoQ at Rs73.4k/vehicle.

- Gross margins contracted 110bp QoQ (-600bp YoY) at 27% leading to EBITDA declined of 26.5% QoQ to Rs11.2b (BE Rs12.05b) with margins at 15.2% (-260bp QoQ, BE 16.2%).

- PAT declined 20.3% QoQ at Rs10.6b (BE Rs11.1b).

- BJAUT has cash equivalents of Rs190.9bas of 1QFY21 (v/s Rs176.9b in FY21).

View - While BJAUT's Q1FY22 revenue remain in line with street est, lower gross margins impacted profitability. However, given near term challenges in domestic 2W market, exports dominated OEMs like Bjaut and TVS are relatively better placed. The stock currently trades at 17.5x of FY23 bloom SA EPS. Not Rated

Call highlights - Near term demand outlook mixed

- Demand - Domestic 2W weak as pent up demand recovery is not as fast as last year. Domestic 3W - recovery with low base, Exports - expect to maintain current momentum. Expect domestic billings to trail retails on high inventory.

- EBITDA margins dip to 15.2% (-250bp QoQ) led by negative operating leverage (-160bp), RM inflation (-220bp) partially offset by favorable forex and mix (+130bp). Have seen ~3% RM inflation in 2Q and have taken 2/3rd price increase to cover the same.

- Betting big on CNG 3Ws with government aggressive target to take CNG pumps reach to ~9k by 2025 (v/s 1.5k currently).

- EV - Chetak - Expect it to be cleared for FAME any time soon. To launch EV 3W as well by end of CY21. Incorporated wholly owned subs which will deal in only EV products.

Shares of BAJAJ AUTO LTD. was last trading in BSE at Rs. 3846.75 as compared to the previous close of Rs. 3852.6. The total number of shares traded during the day was 18168 in over 2679 trades.

The stock hit an intraday high of Rs. 3924.8 and intraday low of 3826.45. The net turnover during the day was Rs. 70220700.

Source: Equity Bulls

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