Bajaj Auto - Domestic in-line; exports remain doubtful - ElaraCapital

- Bajaj reported yet another month of weak sales as export sales dropped down by 14% YoY to ~112K units (we estimated for 147K units)

- Export which forms ~30% of BAL's total volumes has been under pressure since a year now and we remain concerned about growth in FY14E as its key markets lack growth visibility

- On the other hand, BAL's domestic sales in May'13 saw some revival largely on the back of incremental dispatches due to marriage season (in North) and recently launched Discover 100T, along expected lines

- Despite a 14% YoY growth, 3W sales have fallen below its 40K mark to ~35K units forming about 10% of total sales versus 12.6% last month

- We note that the robust double digit growth in 3W implies that domestic sale growth of 2.6% is driven by 3W, and 2W might have remained flat to slightly negative

- Further, while there is no evidence of any strong volume growth revival in domestic market (especially given sharp erosion in recently launched Discover 125 ST volumes), the earnings rely extensively on recovery in exports volumes (management guidance at 10%12% v/s YTD decline of 19%)

Our view: With YTD growth remaining in the negative, at minus 10% YoY driven by ~23% fall in exports and lack of visibility over growth in the coming months, we remain cautious about BAL's ability to scale up volumes in these markets. On the domestic front too, although the YTD growth is positive (due to new launches and festivals), strong competition and tepid demand scenario will curb growth. We expect ~7% YoY growth in FY14E and maintain our negative stance on the stock.

Source : Equity Bulls

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