Bajaj Auto - Both domestic and export volumes below expectation - ElaraCapital

- Bajaj recorded a poor April sales, as exports failed to hold on (yet again) to an otherwise high April base, registering a steep 23% fall

- We note that sales during April are usually the highest, as part of shipments of March gets shifted to April, however, as per the management, this time the impact of this trend wasn't very high as part of it already accrued in March

- We believe this raises serious concerns about exports growth in FY14E (we were never comfortable about it on lack of driver visibility)

- Domestic sales too, disappointed with just 0.6% growth despite having favorable base (unlike Hero) and roll out of Discover T in still in progress, which was expected to generate a low single digit volume growth

- We note that the strong 10% growth in 3W category, despite flat domestic sales and fall in exports, imply very sharp declines in domestic 2W category, raising further concerns about Bajaj's ability to sell in domestic market

- Bajaj has struggled in all the categories except 100cc in FY13, despite launch of Discover ST and Pulsar NS, which affirmed our long held belief about poor market positioning of the company viz a viz Hero  On a positive note though, dealers mentioned strong turnout during Gudi Padwa, hence retail sales are not as weak as wholesale trend, we believe

- 3W sales have grown to cross 40K mark posting a growth of 10% YoY and 27% MoM; its contribution to total volumes stands at 12.6% versus 11.3% in FY13

Our view: With a weak start of the fiscal (minus 10% growth) and shedding market share despite new launches, we expect a rebound only towards July (low base) and continue to remain doubtful of Bajaj's ability to scale-up volumes in FY14E as well. Remain negative on the stock.

Source : Equity Bulls

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