Bajaj Auto: Maintain ‘buy’, co posts 26.1% revenue growth

BAL has reported PAT of ~Rs 13.3bn (up 2% YoY) and declared dividend of Rs 140/share.

Bajaj Auto’S (BAL) Q4FY21 margins were a beat on consensus expectations at 17.7% (down 65bpsYoY). BAL’s margin resilience was driven by rise in export mix (up 340bpsYoY at 46.4%) and increased share of Pulsar-125cc has led to superior domestic motorcycle mix (share up 13.7% to 26.3%). Management’s focus on building on electric vehicles starting with Chetak is a long term positive. They believe existing incumbents are well placed in terms of technology distribution and brand to handle the potential entry of PE-backed start-up companies in 2Ws. We believe BAL’s key drivers of profitability remain exports demand in commodity markets (e.g. Africa, LatAm), exports incentives/FX benefits, c) premiumisation in domestic market. The stock remains attractive at <15x PE /5.4% FCF yield on FY23E basis. We maintain ‘buy’.

Key highlights of the quarter: BAL has reported 26.1% YoY growth in revenue as ASP rose 6.9% to ~Rs 73.5k/unit supported by product mix, price hikes (~2%). EBITDA margin contracted ~65bpsYoY despite tight control on employee costs (down 145bpsYoY) and other expenses (down 131bpsYoY). Gross margin contracted 341bps due to higher RM costs as commodity basket prices edge higher (~4% inflation in Q4). BAL has reported PAT of ~Rs 13.3bn (up 2% YoY) and declared dividend of Rs 140/share.

Key takeaways from earnings call: Management indicated, Second highest exports (~Rs 40 billion); BAL sold highest ever Pulsar motorcycles with 125cc variant leading the growth (128k units in 4Q), with ~77% sales from geographies where BAL enjoys leadership position; BAL’s strategy on electrification is focused on market expansion via product and not by discounting which as per them would make the business model unsustainable; domestic CV demand is gradually picking up.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.