Bajaj Auto - Uncertainty priced in, Upgrade to BUY - Emkay

- Valuations pricing in bear case scenario (0%/4% volume growth in FY13/14). Product mix to improve going ahead. Strong cash flow/dividend yield to lend further support.

- Value of KTM under-recognized. Benefits emerge from technology sharing and exports. Strong financial performance of KTM to result in value discovery.

- Series of new launches and hike in petrol price (blessing in disguise) can lead to demand revival in 2HFY13. Launches under main brand have higher chance of success.

- Lower FY13E EPS by 4% to Rs 119. Introduce FY14 est. with volume of 5.2mn and EPS of Rs 133. Upgrade to BUY and maintain TP at Rs 1,920 (14.4x/9.4x FY14E PER/EV-EBIDTA).

Source : Equity Bulls

Keywords