Bajaj Auto - CMP Rs.1867 - 2012 Diwali Pick - Aditya Birla Money

Bajaj Auto is known for its best in class operating margin (~20%) in the Auto OEM space. Since FY09, Bajaj is maintaining its industry best margin for 14 quarters (18-20%) despite headwinds from lower demand export disruption and intense competition Bajaj's 20%), demand, competition. Bajaj s brand led strategy and superior product mix led by Discover, Pulsar and 3w has helped them to retain the high margins and grow at a healthy pace. Rajiv Bajaj's high risk taking ability, brand led strategy and clear vision of transforming BAL into GLOBAL BAJAJ in Motorcycle segment augurs well for BAL in the medium to long term.

Bajaj's key differentiators are

a) strong export markets presence (~35% of volume - Africa, SL, NA, Bangladesh, etc.,),
b) brand led rich product mix,
c) strong in-house R&D facilities (in addition, they have collaboration with KTM) and
d) low fixed cost (only ~6.5% of sales).

Bajaj Auto continues to remain one of our best picks in the Auto space for it's a) above industry average margin (18-20% vs ~12%), b) consistent growth (CAGR FY08-12 of ~22%) and c) higher return ratios (~50% RoE). Currently, it is trading at 14.3x on FY14E EPS, we continue to retain our positive stance.

Source : Equity Bulls

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