Bajaj Auto - Domestic sales fails to improve - ElaraCapital

- Bajaj February auto sales was below estimates at 313k, down 6% YoY and 1.5% MoM

- Domestic sales fell 13% YoY post a 17% fall seen in January, indicating that sales of both Discover and Pulsar brands remains weak despite new launches

- While our dealer survey indicated positive feedback for the newly launched Discover variant Discover 100M, sale of the other variants remains in a free fall

- We note with Pulsar sales also joining struggling Discover variants line-up since December, success of the newly launched Discover 100M is crucial for the company to stage a comeback in the domestic bike market. However, for now, it lacks conviction

- Further, a costly absence in the scooter segment is hurting the company's volume growth and market share, even as Hero Motocorp continues to strengthen its position in this segment

- Exports too performed poorly by posting only 5% YoY growth and 3% MoM, indicating demand in destination countries remains under pressure despite low base

- 3W sales contracted YoY for the 8th consecutive month, by 3% YoY. The share of 3W in total sales though has remained steady at 12.8%

Our view: With YTD growth continuing to contract at 9.4% YoY, driven by a 15.7% fall in domestic market volume and a lack of visibility over growth in the coming months, we remain cautious about BAL's ability to scale up volume in FY15. The current valuations continue to build optimistic volume growth and steady margin for FY15, and offer little room for upside. We maintain our negative stance.

Source : Equity Bulls

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