Bajaj Auto - Q1FY14 Result Review - Angel Broking

Bajaj Auto's (BJAUT) 1QFY2014 results were broadly in-line with our expectations and were driven by a strong growth of 9.7% yoy (18% qoq) in exports revenue. The results exceeded expectations by a wide margin after adjusting for a notional loss of Rs. 96cr related to the forward exchange rate contracts.

For 1QFY2014, the top-line grew by 0.9% yoy (3.5% qoq) to Rs. 4,911cr led by a strong growth of 12.4% yoy (3.6% qoq) in net average realization. The net average realization benefitted from favorable rates on the forex hedges and also due to price hikes taken since 1HFY2013. Total volumes however, declined by 9.2% yoy (flat qoq) on account of slowdown in domestic motorcycle demand. While exports revenue in USD terms declined by ~3% yoy; INR depreciation versus the USD led to a strong growth of 9.7% yoy (18% qoq) in INR terms. On the operating front, EBITDA margins improved 55bp yoy (84bp qoq) to 18.5% which was in-line with our estimate of 18.4%. Margin expansion was driven by better realization on the exports front and also due to softening of commodity prices. While raw-material expenditure as a percentage of sales declined 273bp yoy (245bp qoq), other expenditure as a percentage of sales surged 170bp yoy (140bp qoq), primarily on account of a notional loss of Rs. 96cr related to outstanding forward rate options. Adjusted for the notional loss, EBITDA margins exceeded expectations and came in at 20.4%. Net profit for the quarter stood at Rs. 738cr (up 2.7% yoy) and was broadly in-line with our estimates of Rs. 726cr. Going ahead, we would seek clarity from the Management on its outlook for the exports markets and also the demand scenario in the domestic motorcycle market.

At the current market price of Rs. 1,967, the stock is trading at 14.1x FY2015E earnings. Currently we have an Accumulate rating on the stock with a target price of Rs. 2,096.

Source : Equity Bulls

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