Bajaj Auto - Result Report Q3 FY22 - YES Securities

Margins to bottom out, EV focus intensified

Valuation and View

BJAUT 3QFY22 missed our estimates by ~9% both at EBITDA and PAT. EBITDA margins at 15.2% (est 16.5%, -80bp QoQ/420bp YoY). This was largely led by decade low gross margins at 25.3% (-100bp QoQ/390bp YoY) due to RM inflation and weak mix. However, as entire RM inflation has already been passed on, margins expansion is likely ahead. This will be further aided by 1) volume recovery in high margins 3W segment and 2) steady exports. We build in ~150bp margins expansion to ~17% by FY24 over FY22.

While domestic 2W demand outlook remain weak (especially in the lower end segment), BJAUT is relatively better placed led by its dominance in exports (~16% CAGR volumes expected over FY21-24), widest premium product portfolio and market leadership in 3W segment. We estimate Revenue/EBITDA/ PAT CAGR of ~14%/13%/13% over FY21-24E and arrive at TP of Rs3,807 (16x Dec'23 EPS) and maintain 'BUY'. We cut FY23/24 EPS estimate by 2.7%/3.6% to factor in lower other income and higher depreciation. While BJAUT is aggressively working on its EV portfolio through i) channel expansion, ii) investment towards building capacity of 5L e2W/year and iii) 3 EV platforms with launches expected in 1HFY23, any success on this front can be key re-rating catalyst.

Result Highlights

• Revenues grew 1.3% YoY (+3% QoQ) at Rs90.2b (in line) as ~10% YoY decline in volumes were offset by ~12% YoY growth (flat QoQ) in ASPs at Rs76.4k/vehicle (in-line). The company took ~5% price hike for its export division during 3Q while it has passed on entire RM inflation in domestic markets as well.
• Gross margins contracted ~390bp YoY (-100bp QoQ) at 25.3% led by lag in RM inflation pass through and weaker mix. We build in ~40bp QoQ EBITDA margins recovery assuming no major disruptions on demand front due to third wave.
• Consequently, EBITDA declined ~20.7% YoY/ 2.1% QoQ at Rs13.7b (est Rs15.2b) with margins at 15.2% (-420bp YoY/ -80bp QoQ, est at 16.5%).
• Led by weak op. performance and lower other income at Rs2.7b (-14.3% QoQ, est at Rs3.5b), Adj. PAT declined 22% YoY/ (-4.7% QoQ) at Rs12.1b (est Rs13.5b)

Link to the report

Shares of Bajaj Auto Limited was last trading in BSE at Rs. 3425.30 as compared to the previous close of Rs. 3309.60. The total number of shares traded during the day was 55326 in over 7737 trades.

The stock hit an intraday high of Rs. 3472.00 and intraday low of 3270.75. The net turnover during the day was Rs. 188753388.00.

Source : Equity Bulls

Keywords

BajajAuto INE917I01010 Q3FY22 ResultReport YESSecurities