Views on Bajaj Auto 4QFY2014 results - Angel Broking

Views of Mr. Yaresh Kothari (Research Analyst – Automobile, Angel Broking) on Bajaj Auto 4QFY2014 results

- Bajaj Auto results lower-than-estimates

Bajaj Auto 4QFY2014 Result Review (CMP: Rs 1,977/ TP: Under review/ Recommendation: Buy):

"For 4QFY2014, Bajaj Auto's (BJAUT) reported net profit at Rs 764cr was sharply lower than our expectations of Rs 835cr largely due to operating margin pressures (down 324bp qoq to 18.9%) and lower-than-expected other income. The operating performance was impacted owing to substantial increase in other expenditure, partly on account of the foreign exchange loss of Rs 37cr which impacted EBITDA margins by ~75bp during the quarter. Adjusted for the forex gains, EBITDA margins stood at 19.6%, still comfortably lower than our estimates of 20.7% and bottom-line stood at Rs 800cr. Top-line for the quarter increased marginally by 3.9% yoy to Rs 4,932cr, slightly above our expectations of Rs 4,869cr. The performance was impacted due to a volume decline of 4.6% yoy led by the sluggish performance in the domestic markets which witnessed volume decline of 12.7% yoy. Consequently, domestic revenues declined sharply by 10.1% yoy. Export volumes posted a strong growth of 9% yoy driven by strong growth in the motorcycle segment which coupled with favorable currency movement led to a 30% yoy growth in export revenues. While domestic net average realization increased 3% yoy; exports net average realization surged 19.3% yoy during the quarter.

We expect the domestic performance of the company to remain under pressure in the near term due to the weakness in the domestic motorcycle segment; nevertheless, on the exports front, we expect the company to continue registering strong growth led by market share gains in Africa and Latin America. At the CMP, the stock is trading at 13.5x FY2016E earnings. We maintain our positive view on the company and maintain our Buy rating. Our target price is currently under review."

Source : Equity Bulls

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