Bajaj Auto - 3QFY2014 results - Angel Broking

Views of Mr. Yaresh Kothari (Research Analyst - Auto & Auto Ancillary, Angel Broking) on Bajaj Auto 3QFY2014 results:

Bajaj Auto results beats estimates led by mark to market gains; adjusted results lower than expected

"Bajaj Auto's (BJAUT) reported net profit at Rs. 905cr for 3QFY2014 was ahead of our estimates of Rs. 861cr; however, it was driven largely by mark to market gains of Rs. 96cr (against a loss of Rs. 39cr in 2QFY2014). Adjusted for the forex gains though, net profit declined 1.2% yoy (7.7% qoq) to Rs. 809cr which was 6.1% lower than our expectations. Adjusted EBITDA margins too declined 237bp sequentially to 20.3%, broadly in-line with our expectations, primarily led by adverse product-mix and lower utilization levels. On a yoy basis, EBITDA margins improved 157bp aided mainly by favorable currency movement. Top-line for the quarter declined 5.2% yoy (flat qoq) to Rs. 5,131cr, slightly below our expectations of Rs. 5,321cr. The performance was impacted due to a volume decline of 11.9% led by the sluggish demand in the domestic markets which resulted in domestic volumes declining by 24% yoy. As a result, domestic revenues declined sharply by 19.1% yoy. Nevertheless, export volumes posted a strong growth of 12.3% driven by strong growth in the motorcycle segment which coupled with favorable currency movement led to a 23.5% yoy growth in export revenues.

We expect the domestic performance of the company to remain under pressure in the near term due to sluggish demand environment; nevertheless, on the exports front, we expect the company to continue registering strong growth led by market share gains in Africa and Latin America. We maintain our positive stance on the company given its diversified business model, strong focus on profitable growth, widening reach in the export markets and strategic alliances with global majors. We maintain our Buy rating on the stock; however our target price is currently under review. Post result conference call with the management is scheduled on Friday, January 17, 2014."

Bajaj Auto 3QFY2014 Result Review (CMP: Rs. 1,908/ TP: Under review/ Recommendation: Buy)

Source : Equity Bulls

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