Expect Bajaj Auto to shift to higher gear

31 Мар 2015 | Author: | Комментарии к записи Expect Bajaj Auto to shift to higher gear отключены

Expect Bajaj Auto to to higher gear

The Bajaj scrip, under pressure November 2013 due to weak sales and, recently, due to banning the import of two- and is likely to have bottomed Though sales in February up to the mark (domestic motorcycles fell 13 per cent), the stock stable, primarily due to an expected in the fortunes of the company.

Analysts new launches to arrest the fall in the sales and market share. at Kotak Institutional Equities say Auto’s aggressive pricing in the domestic executive motorcycle is likely to improve its market by 200 basis points, owing to value proposition (better and similar pricing compared to while growth in export will remain strong. inventory at usual levels, the expects to improve volumes due to the launch of Discover 100M and the launch of Discover 125M in

The near-term growth engine for Auto, however, will be which currently account for 45 per of volumes; in February, these five per cent year-on-year. the Egypt import ban is a setback, the expects to gain with sales to Nigeria, Africa’s market for two-wheelers. Analysts exports growth to be 15-18 per through the next couple of

Given the exports potential and the recovery on the domestic front, such as Espirito Santo’s Jhawar and Nitesh Sharma to prefer Bajaj Auto to MotoCorp. Despite their of 18-20 per cent annual growth till FY16, Auto, they say, is (13.5 times FY15 earnings) at a substantial discount of 13 per to its larger peer.

They argue Bajaj trade at a par with Hero, its diversified business mix, exposure to the domestic two-wheeler higher profitability and the ability to a larger share of exports. to Bloomberg, of the 63 analysts polled, 59 per have buy’ and 33 per cent ratings on the Bajaj Auto

Relying on exports

Analysts exports growth will be led by Latin America and Africa, account for about half of Auto’s exports.

Low penetration, income growth and demand for two-wheelers are likely to the company’s growth in these Kotak’s analysts believe is significant export potential, China’s annual two-wheeler are pegged at nine million, India records just two And, these exports by (Bajaj has a 60 per cent share in two-wheeler exports) grew 20 per during 2010-2013, while exports grew just per cent.

The fact that the government banned the import of and three-wheelers remains a road Exports to Egypt account for six per of the company’s revenue and eight per of its earnings before interest depreciation and amortisation, primarily due to three wheelers.

Analysts at Kotak, however, the loss on the Egypt front is to be offset by additional volumes in the market.

Given its 90 per cent in the three-wheeler market, the company is to get the lion’s share of new permits that the Maharashtra government is to issue between March and 2014. They add this growth of 40 per cent in domestic volumes in FY15.

At the profit the gains should be higher, three-wheelers have a margin of 25 per cent, versus 18 per cent for say analysts.

Domestic revival?

The concern has been the steady in domestic market share (a fall in the first nine of FY14), with volumes 16 per cent year-to-date. The company is to end FY14 with a market of about 20 per cent, against per cent in FY13. This is of multiple variants of the Discover and of focused promotions, which say led to confusion among customers.

Espirito Santo analysts a strategy of restricting Discover models to three distinct of the M series (100M, 125M, and a model), increasing traction for new and lower inventory will strong retail sales for the segment, the key underperformer for Bajaj Through the past year, the has lost about 500-600-basis-point share in this segment.

In the segment, Bajaj’s volumes so far financial year are down four cent. Analysts a rebound in FY15, led by new launches of (one in the 200-cc category and two in the segment).

Bajaj Discover
Bajaj Discover
Bajaj Discover

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