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July 21, 2017 Analyst: AshutoshTiwari [email protected] (+91-8128694112 +91 79-40504017) Page 1 of 12
Before reading this report, you must refer to the disclaimer on the last page.
Bajaj Auto Ltd. Absolute: REDUCE
Relative: BENCHMARK
1QFY18 Result: Estimate (), PT (), Rating () Regular Coverage 2% ATR in 14 months
Margins unlikely to scale historical highs, domestic volumes to stay weak; maintain REDUCE Auto
© 2017 Equirus All rights reserved
Rating Information
Price (Rs) 2,815
Target Price (Rs) 2,811
Target Date 30th Sep' 18
Target Set On 21st Jul'17
Implied yrs of growth (DCF) 12
Fair Value (DCF) 2,461
Fair Value (DDM) 1,167
Ind Benchmark BSEAUTO
Model Portfolio Position NA
Stock Information
Market Cap (Rs Mn) 814,568
Free Float (%) 50.70 %
52 Wk H/L (Rs) 3122/2510
Avg Daily Volume (1yr) 288,668
Avg Daily Value (Rs Mn) 795
Equity Cap (Rs Mn) 2,894
Face Value (Rs) 10
Bloomberg Code BJAUT IN
Ownership Recent 3M 12M
Promoters 49.3% 0.0% 0.0%
DII 7.7% -0.7% -0.2%
FII 17.4% -0.2% -0.7%
Public 25.6% 0.9% 0.8%
Price % 1M 3M 12M
Absolute 0.2 % -0.1 % 1.9 %
Vs Industry -0.9 % -10.8 % -16.6 %
Hero Motocorp -1.4 % 16.0 % 13.8 %
TVS Motors 3.9 % 17.6 % 88.8 %
Standalone Quarterly EPS forecast
Rs/Share 1Q 2Q 3Q 4Q
EPS (17A) 33.8 38.8 32.0 27.7
EPS (18E) 33.0 35.1 34.9 31.0
BJAUT’s EBITDA margin at 17.2% (-322bps yoy/-126bps qoq, 196bps below EE)
disappointed due to heavy discounts in the entry segment and increased RM costs.
Entry-segment discounts during the peak wedding season suggest weakness in CT and
Platina variants. As highlighted in our earlier notes, even the V family and Avenger
volumes have tapered off from their last year’s monthly averages and are unlikely to
rebound to those levels. We remain negative on BJAUT’s domestic sales but expect
good growth in exports off a lower base yoy. We pare our FY18/FY19 EBITDAM
estimates by 103bps/87bps, leading to a 6.3%/5.5% cut in our EPS estimates. Maintain
REDUCE with a Sep’18 TP of Rs 2,811 (vs. Rs 2,984 earlier).
Entry segment, V and Avenger to pressurize domestic volumes: During the peak
wedding season, BJAUT offered discounts on its entry-segment bikes CT100 and
Platina; this suggests weakness in these brands as other OEMs reported stock-outs for
their large-selling models in this period. Monthly average volumes for V family (V15,
V12) fell to 14k in 1QFY18 vs. 27k in 1QFY17 despite the addition of V12. Similarly, for
Avenger, volumes declined from 19k to 8k in 1QFY17. While management guided for V
family monthly volume of 20-25k during the festive season and 12-15k for Avenger,
this would happen only during peak demand months. Therefore, we expect domestic
volumes to remain weak in 1H and recover in 2H only due to a lower base.
Margins unlikely to touch historical highs as <150cc bikes will remain competitively
priced: If BJAUT has to gain share in the domestic motorcycle market, it has to do
well in executive and entry segments, where its bikes (including V, CT100 and Platina)
are competitively priced and hence lower in mrgin. We already saw the impact of this
on 1Q EBITDAM. As such, management accepted that in percentage terms, margins
would be lower than historical levels.
EBITDA down 20% yoy as raw material costs rise 279bps yoy: RM cost as a percentage
of sales increased 279bps yoy & 220bps qoq due to (1) an increase in RM prices, which
was partially passed on from April-end only, (2) higher discounts on CT100 and Platina,
and (3) passing on of only cost increases related to RM and shift from BS-III to BS-IV
norms; therefore, in percentage terms, margins will tend lower. A&P expenses are
also likely to increase going ahead as the company will intensify promotions to revive
V, Avenger and Dominor volumes. Management guided for
19.5-20% margins for FY18E, including ‘others’ component of other income.
Estimate Revision:
Current Change from previous
(%)
RsMn FY18E FY19E FY18E FY19E
Sales 241,977 273,770 -3.2% -2.1%
EBITDA 44,948 51,302 -8.3% -6.5%
PAT 40,127 45,505 -6.3% -5.5%
EPS 138.7 157.3 -6.3% -5.5%
Consolidated Financials
Rs. Mn YE Mar FY17A FY18E FY19E FY20E
Sales 217,667 241,977 273,770 306,228
EBITDA 44,194 44,948 51,302 57,386
Depreciation 3,073 3,125 3,325 3,588
Interest Expense 14 2 0 0
Other Income 12,222 11,747 12,877 14,562
Reported PAT 40,795 39,803 45,505 50,963
Recurring PAT 40,795 40,127 45,505 50,963
Total Equity 178,566 197,471 220,337 246,920
Gross Debt 1,692 1,692 1,692 1,692
Cash 123,757 138,781 157,439 178,680
Rs. Mn Per Share FY17A FY18E FY19E FY20E
Earnings 141.0 138.7 157.3 176.1
Book Value 617 682 761 853
Dividends 55.0 60.0 65.0 70.0
FCFF 63.5 114.7 132.6 146.9
P/E (x) 20.0 20.3 17.9 16.0
P/B (x) 4.6 4.1 3.7 3.3
EV/EBITDA (x) 15.8 15.2 12.9 11.2
ROE (%) 26 % 21 % 22 % 22 %
Core ROIC (%) 49 % 43 % 47 % 50 %
EBITDA Margin (%) 20 % 19 % 19 % 19 %
Net Margin (%) 19 % 17 % 17 % 17 %
Bajaj Auto Ltd. Absolute –REDUCE Relative – BENCHMARK 2% ATR in 14Months
July 21, 2017 Analyst: AshutoshTiwari [email protected] (+91-8128694112, +91-79-40504017) Page 2 of 12
Exhibit 01: Domestic quarterly 2W volume mix (in ‘000 units)
Exhibit 02: Quarterly 2W export volume mix (In ‘000 units)
Source: SIAM, Equirus Securities
Exhibit 03: 3W domestic & export sales volumes (In ‘000 units)
Exhibit 04: Export & domestic sales (Rs bn); exports as % of sales vs. EBITDA margins
Source: SIAM, Equirus Securities
319 278 258200 195 181
290230 217 184
231 251204
149 186
5461
57
26 18 13
1345 54
3529 25
3145
36
102109 124
172 164127
126119 128
169
223 218
165
137134
527494 491
462439
379
486 469 475 469
549580
459414 427
0
100
200
300
400
500
600
7003Q
FY14
4Q
FY14
1Q
FY15
2Q
FY15
3Q
FY15
4Q
FY15
1Q
FY16
2Q
FY16
3Q
FY16
4Q
FY16
1Q
FY17
2Q
FY17
3Q
FY17
4Q
FY17
1Q
FY18
>75cc & <=110cc >110cc <=125cc >125cc but <=150cc >150 <= 200 cc >=200cc
235 219 241 248 251
137
244 258214
137172 155 158 158 168
3025
3880
45
39
2426
20
22
2726 22 24
35
5547
56
6062
74
7297
70
79
90 99 75 7385
3435
36
3838
34
38
46
42
35
26 2928 22
41
360331
384
438406
294
389
434
352
284
324 318290 287
349
0
50
100
150
200
250
300
350
400
450
3Q
FY14
4Q
FY14
1Q
FY15
2Q
FY15
3Q
FY15
4Q
FY15
1Q
FY16
2Q
FY16
3Q
FY16
4Q
FY16
1Q
FY17
2Q
FY17
3Q
FY17
4Q
FY17
1Q
FY18
>75cc & <=110cc >110cc <=125cc >125cc but <=150cc >150 <= 200 cc >=200cc
44 4456
7555 49 51
67 66 71 75 7454 50 52
62 6658
82
84
61
87
86
58 49 4760
4937
60
106 110 114
156
139
110
138
153
124 120 122135
103
87
113
-10
10
30
50
70
90
110
130
150
170
3Q
FY14
4Q
FY14
1Q
FY15
2Q
FY15
3Q
FY15
4Q
FY15
1Q
FY16
2Q
FY16
3Q
FY16
4Q
FY16
1Q
FY17
2Q
FY17
3Q
FY17
4Q
FY17
1Q
FY18
Domestic Export
41% 42% 43%46%
47%44%
47% 47%
41%38%
36% 35%38%
36%
46%
22.1%18.9%17.6%18.9%
21.7%
17.7%20.4%21.7%21.1%21.5%20.5%21.4%20.6%
18.5%17.2%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0
10
20
30
40
50
60
3Q
FY14
4Q
FY14
1Q
FY15
2Q
FY15
3Q
FY15
4Q
FY15
1Q
FY16
2Q
FY16
3Q
FY16
4Q
FY16
1Q
FY17
2Q
FY17
3Q
FY17
4Q
FY17
1Q
FY18
Domestic Exports
Bajaj Auto Ltd. Absolute –REDUCE Relative – BENCHMARK 2% ATR in 14Months
July 21, 2017 Analyst: AshutoshTiwari [email protected] (+91-8128694112, +91-79-40504017) Page 3 of 12
Key concall takeaways:
Raw material cost increase, price hikes, EBITDA margins & dealer compensation:
Raw material cost as a percentage of sales increased by 220bps qoq and 279bps
yoy on account of:
1. Metal cost increases from 1 Apr, when quarterly price increases of vendors
came into effect, which contributed ~1.1% of sales.
2. Discounts on CT100 and Platina during the wedding season.
3. A shift from excise free to excise duty zone in Pantnagar, which
contributed around 0.5% of sales.
The company hiked domestic 2W prices by Rs 500-1,000/unit and 3W prices by
Rs 1500-2000/unit from 24 May’17.
From 1 July, BJAUT will effect price increases for 2W/3W in exports markets.
For FY18, we expect EBITDA margin to remain around 19.5-20%.
The Rs 320mn compensation to dealers include three elements: (1) 3W
compensation, (2) price drop over 14-30 June to post GST pricing, (3) payment
of CST and entry tax which included 2% entry tax for Madhya Pradesh and West
Bengal, 1% entry tax for Orissa, and 2% CST provided to dealers on inventory.
CBS should increase cost by Rs 1,000-1,500/bike.
EBITDA margin in the month of May and June was close to 20%.
Margins for exports, 3Ws and spares are over 25%.
BJAUT expects US$-INR realizations of 66.7-66.8 on exports in the remaining
quarters of FY18.
Spare part sales for 1QFY18 stood at Rs 6.51bn (1QFY17: Rs 6.37bn), of which
domestic market contributed Rs 4.6bn and exports the remaining.
Domestic 2W volumes:
BJAUT expects volumes for V to go up to 20-25k/month during the festive season
(September-October).
Avenger volumes should stabilise around 12-15k per month; the company intends
to undertake extensive field activity to revive Avenger volumes.
Advertising for Dominor has increased from June to revive volumes.
The domestic 2W domestic industry is expected to grow by ~7% in FY18.
BJAUT expects 10% volume growth from July.
June-end inventory stood at around 150k, and stocks corrected by 45,000 during
the month.
Pulsar lost volumes in West Bengal, Orissa, Bihar and Uttar Pradesh (UP).
The average inventory with dealers is generally maintained at 4-4.5 weeks,
however currently its lower due to destocking.
The first 10 days of July saw soft retail sales due to pre-GST buying spurred by
discounts in June.
In the V family, focus will be on V15.
No new brand is likely to be launched in FY18.
BJAUT has around 650 2W primary dealers in the domestic market.
Domestic 3W volumes:
BJAUT’s 3W monthly run-rate going ahead should be ~20-22k driven by:
1. Mandatory conversion of 2-stroke 3Ws to 4-stroke 3Ws in Karnataka.
2. A ban on diesel vehicles in Bengaluru, which should benefit BJAUT’s CNG
portfolio.
3. More permits in Delhi and a shift from quota permits in Maharashtra
BJAUT expects 5% growth in domestic 3Ws next year, mainly driven by goods
vehicles.
The company doesn’t see any market share losses with the opening of
Maharashtra permits.
Electric 3Ws are likely to be launched in one year.
3Ws would be first to move to electric vehicle platform; therefore, BJAUT is
moving swiftly to launch the product.
Exports:
BJAUT expects exports for H1 at ~0.8mn and to close FY18 at 1.6mn.
The company’s export mix has changed with improved proportion of high-value
bikes.
Export margins have gone up despite a decline in exports to Nigeria.
The company is doing well in the export markets of Turkey, Iran and South East
Asia.
3W exports to Bangladesh, Egypt and Peru have picked up, while exports to Sri
Lanka have declined.
Bajaj Auto Ltd. Absolute –REDUCE Relative – BENCHMARK 2% ATR in 14Months
July 21, 2017 Analyst: AshutoshTiwari [email protected] (+91-8128694112, +91-79-40504017) Page 4 of 12
Quarterly Results Table (Standalone)
Rs Mn 1QFY18 1QFY18E 4QFY17 1QFY17 % Change
Comments 1QFY18E 4QFY17 1QFY17
Net Sales 54,424 54,320 48,973 57,480 0% 11% -5%
Raw Material 38,093 37,101 33,203 38,628 3% 15% -1%
Employee Cost 2,725 2,390 2,273 2,683 14% 20% 2%
Other Expenses 4,222 4,400 4,438 4,405 -4% -5% -4%
Total Expenditures 45,040 43,891 39,913 45,716 3% 13% -1%
EBITDA 9,384 10,429 9,060 11,763 -10% 4% -20%
EBITDA before MTM 9,384 10,429 9,060 11,763 -10% 4% -20%
Depreciation 753 769 757 775 -2% -1% -3%
EBIT 8,631 9,661 8,303 10,989 -11% 4% -21%
Interest 2 0 2 2 0% 9%
Other Income 4,573 2,816 2,936 2,671 62% 56% 71%
PBT 13,201 12,477 11,236 13,657 6% 17% -3%
Tax 3,642 3,743 3,218 3,873 -3% 13% -6%
Recurring PAT 9,559 8,734 8,018 9,784 9% 19% -2%
Extraordinaries 324 0 -1,259 190
Reported PAT 9,235 8,734 9,277 9,594 6% 0% -4%
EPS (Rs) 33.0 30.2 27.7 33.8 9% 19% -2%
Gross Margin 30.0% 31.7% 32.2% 32.8% -169 bps -220 bps -279 bps
EBITDA Margin 17.2% 19.2% 18.5% 20.5% -196 bps -126 bps -322 bps
Adj EBITDA Margin 17.2% 19.2% 18.5% 20.5% -196 bps -126 bps -322 bps
EBIT Margin 15.9% 17.8% 17.0% 19.1% -193 bps -110 bps -326 bps
PBT Margin 24.3% 23.0% 22.9% 23.8% 129 bps 131 bps 50 bps
PAT Margin 17.0% 16.1% 18.9% 16.7% 89 bps -197 bps 28 bps
Tax Rate 27.6% 30.0% 28.6% 28.4% -241 bps -105 bps -77 bps
Bajaj Auto Ltd. Absolute –REDUCE Relative – BENCHMARK 2% ATR in 14Months
July 21, 2017 Analyst: AshutoshTiwari [email protected] (+91-8128694112, +91-79-40504017) Page 5 of 12
1QFY18 1QFY18E 4QFY17 1QFY17 % Change
Comments 1QFY18E 4QFY17 1QFY17
2W Volumes 775,714 775,714 701,017 872,540 0.0% 10.7% -11.1%
Domestic 2W 426,562 426,562 413,539 548,880 0.0% 3.1% -22.3%
Export 2W 349,152 349,152 287,478 323,660 0.0% 21.5% 7.9%
3W Volumes 112,720 112,720 86,610 122,193 0.0% 30.1% -7.8%
Domestic 3W 52,347 52,347 50,037 75,204 0.0% 4.6% -30.4%
Export 3W 60,373 60,373 36,573 46,989 0.0% 65.1% 28.5%
Domestic Volumes 478,909 478,909 463,576 624,084 0.0% 3.3% -23.3%
Export Volumes 409,525 409,525 324,051 370,649 0.0% 26.4% 10.5%
Domestic Sales (Rs mn) 29,634 29,419 31,183 36,910 0.7% -5.0% -19.7%
Export Sales (Rs mn) 24,790 25,005 17,790 20,570 -0.9% 39.3% 20.5%
ASP (Rs/unit) 61,258 61,141 62,178 57,784 0.2% -1.5% 6.0%
Domestic ASP (Rs/unit) 61,878 61,213 67,267 59,142 1.1% -8.0% 4.6%
Export ASP (Rs/unit) 60,534 61,058 54,899 55,497 -0.9% 10.3% 9.1%
EBITDA/Vehicle (Rs/unit) 10,562 11,739 11,503 11,826 -10.0% -8.2% -10.7%
Cost items as % of Sales
RM 70.0% 68.3% 67.8% 67.2% 169 bps 220 bps 279 bps
Employee Cost 5.0% 4.4% 4.6% 4.7% 61 bps 37 bps 34 bps
Other Expenses 7.8% 8.1% 9.1% 7.7% -34 bps -130 bps 9 bps
Adj Other Expenses 0.0% 0.0% 7.8% 8.8% 0 bps -782 bps -883 bps
Bajaj Auto Ltd. Absolute –REDUCE Relative – BENCHMARK 2% ATR in 14Months
July 21, 2017 Analyst: AshutoshTiwari [email protected] (+91-8128694112, +91-79-40504017) Page 6 of 12
Company Snapshot
How we differ from Consensus
- Equirus Consensus % Diff Comment
EPS FY18E 138.7 150.0 -8 % Below consensus due to lower margin
assumptions FY19E 157.3 166.3 -5 %
Sales FY18E 241,977 247,459 -2 %
FY19E 273,770 276,849 -1 %
PAT FY18E 39,803 43,155 -8 %
FY19E 45,505 48,060 -5 %
Key Assumptions:
FY17A FY18E FY19E FY20E
2W Domestic Sales 2,001,391 2,024,972 2,205,702 2,382,158
yoy change 5.4% 1.2% 8.9% 8.0%
2W Export Sales 1,218,541 1,393,963 1,548,042 1,702,846
yoy change -16.5% 14.4% 11.1% 10.0%
Total 2W Sales 3,219,932 3,418,936 3,753,744 4,085,004
yoy change -4.1% 6.2% 9.8% 8.8%
3W Domestic Sales 253,226 267,300 314,994 340,194
yoy change -0.7% 5.6% 17.8% 8.0%
3W Export Sales 192,792 225,102 237,270 256,251
yoy change -31.1% 16.8% 5.4% 8.0%
Total 3W Sales 446,018 492,403 552,264 596,445
yoy change -16.6% 10.4% 12.2% 8.0%
ASP 59,375 61,865 63,578 65,413
yoy change 2.3% 4.2% 2.8% 2.9%
EBITDA Margin 20.3% 18.6% 18.8% 18.7%
Tax Rate 28.3% 29.4% 30.0% 30.0%
NCW Days -2 0 1 2 Risk to our view: A sharp recovery in domestic volumes would be an upside risk to our
volume estimates.
Key triggers
Margin decline & volume pressure
Sensitivity to Key Variables % Change % Impact on EPS
EBITDA Margin 1 % 5 %
Volume 1 % 1 %
- - -
DCF Valuations & Assumptions
Rf Beta Ke Term. Growth Debt/IC in Term. Yr
6.8 % 0.9 11.9 % 2.5 % 2.2 %
- FY18E FY19E FY20-22E FY23-27E FY28-32E
Sales Growth 11 % 13 % 11 % 9 % 8 %
NOPAT Margin 12 % 12 % 12 % 12 % 12 %
IC Turnover 3.51 3.76 3.95 3.95 3.95
RoIC 43.5 % 47.4 % 50.6 % 50.7 % 50.4 %
Years of strong growth 1 2 5 10 15
Valuation as on date (Rs) 1,536 1,651 1,853 2,083 2,247
Valuation as of 30thSep'18 1,756 1,888 2,118 2,382 2,569
On P/E basis, our Sep’18 TP stands at Rs 2,811 set at 19x TTM EPS. Our DCF-based Sep’18
fair value is Rs 2,569.
Company Description:
Bajaj Auto is the flagship company of Bajaj group, one among the Top 10 business houses
in India. Company is also India’s largest 2W & 3W exporter, accounting for 2/3rd of India’s
2W export. Company came into existence as M/s Bachraj Trading Corporation Private
Limited in 1945. In 1972 company launched their 1st scooter by the name ‘Chetak’. The
Rear Engine Auto rickshaw was introduced in 1977 &Bajaj achieved production and sales
of 100,000 vehicles in a single financial year. Company entered into the motorcycle
segment in 1986 with launch of Bajaj M-80 and the Kawasaki Bajaj KB100.
Comparable valuation Mkt Cap
Rs. Mn.
Price
Target
Target
Date
EPS P/E BPS P/B RoE Div Yield
Company Reco. CMP FY17A FY18E FY19E FY17A FY18E FY19E FY17A FY18E FY17A FY18E FY19E FY17A FY18E
Bajaj Auto REDUCE 2,815 816,666 2,811 30th Sep' 18 141.0 138.7 157.3 20.0 20.3 17.9 617 4.1 26% 21% 22% 2% 2%
Hero Motocorp REDUCE 3,716 742,073 3,331 30th June'18 169.1 184.1 189.8 22.0 20.2 19.6 464 6.9 39% 37% 33% 2% 2%
TVSMOTOR NA 567 269 NA NA 16.2 15.6 20.8 35.0 36.2 27.3 18 27.4 12% 22% 23% 0% 0%
Bajaj Auto Ltd. Absolute –REDUCE Relative – BENCHMARK 2% ATR in 14Months
July 21, 2017 Analyst: AshutoshTiwari [email protected] (+91-8128694112, +91-79-40504017) Page 7 of 12
Standalone Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q17A 2Q17A 3Q17A 4Q17A 1Q18A 2Q18E 3Q18E 4Q18E 1Q19E 2Q19E 3Q19E 4Q19E FY17A FY18E FY19E FY20E
Revenue 57,480 60,545 50,669 48,973 54,424 65,057 65,066 57,429 65,591 71,170 72,757 64,252 217,667 241,976 273,769 306,227
EBITDA 11,763 12,961 10,439 9,060 9,384 12,549 12,363 10,682 11,829 13,728 13,824 11,951 44,224 44,977 51,332 57,417
Depreciation 775 770 772 757 753 780 791 802 813 824 835 853 3,073 3,125 3,325 3,588
EBIT 10,989 12,192 9,667 8,303 8,631 11,769 11,572 9,880 11,016 12,904 12,989 11,098 41,151 41,852 48,007 53,830
Interest 2 7 3 2 2 0 0 0 0 0 0 0 14 2 0 0
Other Income 2,671 3,420 3,193 2,936 4,573 2,737 2,849 2,935 3,239 3,064 3,245 3,326 12,220 13,094 12,874 14,559
PBT 13,657 15,605 12,858 11,236 13,201 14,507 14,421 12,815 14,255 15,969 16,234 14,424 53,356 54,944 60,882 68,389
Tax 3,873 4,378 3,612 3,218 3,642 4,352 4,326 3,844 4,276 4,791 4,870 4,327 15,081 16,165 18,265 20,517
Recurring PAT 9,784 11,228 9,246 8,018 9,559 10,155 10,095 8,970 9,978 11,178 11,364 10,097 38,276 38,779 42,617 47,872
Extraordinary 190 -325 254 -1,259 324 0 0 0 0 0 0 0 -1,142 324 0 0
Reported PAT 9,594 11,553 8,992 9,277 9,235 10,155 10,095 8,970 9,978 11,178 11,364 10,097 39,417 38,455 42,617 47,872
EPS (Rs) 33.81 38.80 31.95 27.71 33.03 35.09 34.89 31.00 34.48 38.63 39.27 34.89 132.27 134.01 147.28 165.44
Key Drivers
2W Domestic Volumes 548,880 579,545 459,427 413,539 426,562 556,363 537,530 504,518 490,546 589,745 580,532 544,879 2,001,391 2,024,972 2,205,702 2,382,158
2W Export Volumes 323,660 317,869 289,534 287,478 349,152 346,477 353,361 344,974 398,749 381,125 388,697 379,471 1,218,541 1,393,963 1,548,042 1,702,846
3W Domestic Volumes 75,204 74,383 53,602 50,037 52,347 76,614 79,795 58,543 82,845 82,744 86,179 63,227 253,226 267,300 314,994 340,194
3W Export Volumes 46,989 60,148 49,082 36,573 60,373 61,952 63,278 39,499 59,981 66,289 68,340 42,659 192,792 225,102 237,270 256,251
- - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - -
Sequential Growth (%)
Revenue 7 % 5 % -16 % -3 % 11 % 20 % 0 % -12 % 14 % 9 % 2 % -12 % - - - -
EBITDA 2 % 10 % -19 % -13 % 4 % 34 % -1 % -14 % 11 % 16 % 1 % -14 % - - - -
EBIT 2 % 11 % -21 % -14 % 4 % 36 % -2 % -15 % 11 % 17 % 1 % -15 % - - - -
Recurring PAT 3 % 15 % -18 % -13 % 19 % 6 % -1 % -11 % 11 % 12 % 2 % -11 % - - - -
EPS 3 % 15 % -18 % -13 % 19 % 6 % -1 % -11 % 11 % 12 % 2 % -11 % - - - -
Yearly Growth (%)
Revenue 3 % 0 % -9 % -9 % -5 % 7 % 28 % 17 % 21 % 9 % 12 % 12 % -4 % 11 % 13 % 12 %
EBITDA 3 % -2 % -11 % -21 % -20 % -3 % 18 % 18 % 26 % 9 % 12 % 12 % -8 % 2 % 14 % 12 %
EBIT 3 % -2 % -12 % -23 % -21 % -3 % 20 % 19 % 28 % 10 % 12 % 12 % -8 % 2 % 15 % 12 %
Recurring PAT 2 % 7 % -5 % -16 % -2 % -10 % 9 % 12 % 4 % 10 % 13 % 13 % -3 % 1 % 10 % 12 %
EPS 2 % 7 % -5 % -16 % -2 % -10 % 9 % 12 % 4 % 10 % 13 % 13 % -3 % 1 % 10 % 12 %
Margin (%)
EBITDA 20 % 21 % 21 % 18 % 17 % 19 % 19 % 19 % 18 % 19 % 19 % 19 % 20 % 19 % 19 % 19 %
EBIT 19 % 20 % 19 % 17 % 16 % 18 % 18 % 17 % 17 % 18 % 18 % 17 % 19 % 17 % 18 % 18 %
PBT 24 % 26 % 25 % 23 % 24 % 22 % 22 % 22 % 22 % 22 % 22 % 22 % 25 % 23 % 22 % 22 %
PAT 17 % 19 % 18 % 16 % 18 % 16 % 16 % 16 % 15 % 16 % 16 % 16 % 18 % 16 % 16 % 16 %
Bajaj Auto Ltd. Absolute –REDUCE Relative – BENCHMARK 2% ATR in 14Months
July 21, 2017 Analyst: AshutoshTiwari [email protected] (+91-8128694112, +91-79-40504017) Page 8 of 12
Consolidated Financials P&L (Rs Mn) FY17A FY18E FY19E FY20E Balance Sheet (Rs Mn) FY17A FY18E FY19E FY20E Cash Flow (Rs Mn) FY17A FY18E FY19E FY20E
Revenue 217,667 241,977 273,770 306,228 Equity Capital 2,894 2,894 2,894 2,894 PBT 53,329 53,567 60,854 68,360
Op. Expenditure 173,473 197,029 222,469 248,842 Reserve 175,672 194,578 217,444 244,027 Depreciation 3,073 3,125 3,325 3,588
EBITDA 44,194 44,948 51,302 57,386 Networth 178,566 197,471 220,337 246,920 Others 0 -324 0 0
Depreciation 3,073 3,125 3,325 3,588 Long Term Debt 1,692 1,692 1,692 1,692 Taxes Paid 15,081 16,165 18,265 20,517
EBIT 41,121 41,823 47,977 53,798 Def Tax Liability 3,990 3,990 3,990 3,990 Change in WC -3,168 -1,281 -718 -1,010
Interest Expense 14 2 0 0 Minority Interest 0 0 0 0 Operating C/F 38,154 38,922 45,196 50,421
Other Income 12,222 11,747 12,877 14,562 Account Payables 2,799 6,660 9,774 13,261 Capex -11,281 -3,000 -3,900 -4,800
PBT 53,329 53,567 60,854 68,360 Other Curr Liabi 29,329 29,450 29,883 30,161 Change in Invest -8,521 -2,724 -2,915 -3,119
Tax 15,081 16,165 18,265 20,517 Total Liabilities & Equity 216,376 239,262 265,677 296,024 Others 0 0 0 0
PAT bef. MI &
Assoc. 38,249 37,402 42,590 47,844 Net Fixed Assets 20,018 19,893 20,468 21,680 Investing C/F -19,802 -5,724 -6,815 -7,919
Minority Interest 0 0 0 0 Capital WIP 422 422 422 422 Change in Debt 67 0 0 0
Profit from Assoc. 2,546 2,724 2,915 3,119 Others 41,009 43,733 46,648 49,768 Change in Equity 26,472 0 0 0
Recurring PAT 40,795 40,127 45,505 50,963 Inventory 7,284 8,542 9,556 10,692 Others -15,275 -18,173 -19,723 -21,261
Extraordinaires 0 324 0 0 Account Receivables 9,533 11,179 12,507 13,994 Financing C/F 11,264 -18,173 -19,723 -21,261
Reported PAT 40,795 39,803 45,505 50,963 Other Current Assets 14,354 16,713 18,636 20,788 Net change in cash 29,616 15,024 18,658 21,241
FDEPS (Rs) 141.0 138.7 157.3 176.1 Cash 123,757 138,781 157,439 178,680 RoE (%) 26 % 21 % 22 % 22 %
DPS (Rs) 55.0 60.0 65.0 65.0 Total Assets 216,376 239,262 265,677 296,024 RoIC (%) 26 % 21 % 21 % 21 %
CEPS (Rs) 151.6 149.5 168.7 188.5 Non-cash Working Capital -958 324 1,042 2,052 Core RoIC (%) 49 % 43 % 47 % 50 %
FCFPS (Rs) 63.5 114.7 132.6 146.9 Cash Conv Cycle -1.6 0.5 1.4 2.4 Div Payout (%) 47 % 53 % 50 % 48 %
BVPS (Rs) 617.1 682.4 761.4 853.3 WC Turnover -227.3 747.1 262.8 149.2 P/E 20.0 20.3 17.9 16.0
EBITDAM (%) 20 % 19 % 19 % 19 % FA Turnover 10.6 11.9 13.1 13.9 P/B 4.6 4.1 3.7 3.3
PATM (%) 19 % 17 % 17 % 17 % Net D/E -0.7 -0.7 -0.7 -0.7 P/FCFF 44.4 24.5 21.2 19.2
Tax Rate (%) 28 % 30 % 30 % 30 % Revenue/Capital
Employed 1.4 1.2 1.3 1.3 EV/EBITDA 15.8 15.2 12.9 11.2
Sales Growth (%) -4 % 11 % 13 % 12 % Capital Employed/Equity 1.0 1.0 1.0 1.0 EV/Sales 3.2 2.8 2.4 2.1
FDEPS Growth (%) 0 % -2 % 13 % 12 % Dividend Yield (%) 2.0 % 2.1 % 2.3 % 2.5 %
TTM P/E vs. 2 yr forward EPS growth
TTM EV/EBITDA vs. 2 yr forward EBITDA growth
TTM P/B vs. 2 yr forward RoE
4x
8x
12x
16x
20x
-40%
-20%
0%
20%
40%
60%
0
1000
2000
3000
4000
May/08
Jan/09
Sep/09
May/10
Jan/11
Sep/11
May/12
Jan/13
Sep/13
May/14
Jan/15
Sep/15
May/16
Jan/17
Sep/17
May/18
Jan/19
EPS Growth
-40%
-20%
0%
20%
40%
60%
80%
0100000200000300000400000500000600000700000800000
May/08
Nov/08
May/09
Nov/09
May/10
Nov/10
May/11
Nov/11
May/12
Nov/12
May/13
Nov/13
May/14
Nov/14
May/15
Nov/15
May/16
Nov/16
May/17
Nov/17
May/18
Nov/18
8x
10x
12x
14x
16x
EBITDA Growth
0%
20%
40%
60%
80%
100%
0
1000
2000
3000
4000
May/08
Jan/09
Sep/09
May/10
Jan/11
Sep/11
May/12
Jan/13
Sep/13
May/14
Jan/15
Sep/15
May/16
Jan/17
Sep/17
May/18
Jan/19
RoE
4x
5x
6x
7x
8x
Bajaj Auto Ltd. Absolute –REDUCE Relative – BENCHMARK 2% ATR in 14Months
July 21, 2017 Analyst: AshutoshTiwari [email protected] (+91-8128694112, +91-79-40504017) Page 9 of 12
Historical Consolidated Financials P&L (Rs Mn) FY14A FY15A FY16A FY17A Balance Sheet (Rs Mn) FY14A FY15A FY16A FY17A Cash Flow (Rs Mn) FY14A FY15A FY16A FY17A
Revenue 201,583 216,143 225,865 217,667 Equity Capital 2,894 2,894 2,894 2,894 PBT 46,549 44,232 54,575 53,329
Op. Expenditure 160,031 175,010 178,054 173,473 Reserve 98,779 108,060 127,561 175,672 Depreciation 1,813 2,675 3,072 3,073
EBITDA 41,552 41,132 47,811 44,194 Networth 101,673 110,953 130,454 178,566 Others -2,454 -6,460 0 0
Depreciation 1,813 2,675 3,072 3,073 Long Term Debt 577 1,118 1,625 1,692 Taxes Paid 13,152 12,853 16,177 15,081
EBIT 39,739 38,458 44,739 41,121 Def Tax Liability 3,518 2,816 2,656 3,990 Change in WC 3,716 -6,457 -8,908 -3,168
Interest Expense 8 65 11 14 Minority Interest 1 0 0 0 Operating C/F 36,472 21,138 32,562 38,154
Other Income 6,818 5,840 9,846 12,222 Account Payables 21,118 17,998 20,271 2,799 Capex -2,540 -2,949 -4,489 -11,281
PBT 46,549 44,232 54,575 53,329 Other Curr Liabi 26,191 26,770 9,260 29,329 Change in Invest -24,403 -4,185 20,685 -8,521
Tax 13,887 13,492 16,177 15,081 Total Liabilities & Equity 153,078 159,656 164,266 216,376 Others 2,156 2,994 0 0
PAT bef. MI & Assoc. 32,662 30,740 38,398 38,249 Net Fixed Assets 20,064 19,172 20,257 20,018 Investing C/F -24,788 -4,140 16,197 -19,802
Minority Interest -4 0 0 0 Capital WIP 1,441 2,549 522 422 Change in Debt -271 0 507 67
Profit from Assoc. 1,455 2,137 2,214 2,546 Others 75,328 42,266 23,941 41,009 Change in Equity 940 467 -1,956 26,472
Recurring PAT 34,121 32,877 40,613 40,795 Inventory 6,412 8,142 7,191 7,284 Others -13,015 -16,909 -17,101 -15,275
Extraordinaires 0 0 0 0 Account Receivables 7,962 7,170 7,179 9,533 Financing C/F -12,347 -16,442 -18,550 11,264
Reported PAT 34,121 32,877 40,613 40,795 Other Current Assets 13,964 16,424 11,036 14,354 Net change in cash -662 556 30,208 29,616
EPS (Rs) 117.9 113.6 140.3 141.0 Cash 27,906 63,933 94,141 123,757 RoE (%) 37 % 31 % 34 % 26 %
DPS (Rs) 50.0 50.0 55.0 55.0 Total Assets 153,078 159,656 164,266 216,376 RoIC (%) 36 % 30 % 33 % 26 %
CEPS (Rs) 124.2 122.9 151.0 151.6 Non-cash Working Capital -18,970 -13,033 -4,125 -958 Core RoIC (%) 89 % 67 % 66 % 49 %
FCFPS (Rs) 40.4 58.9 168.5 63.5 Cash Conv Cycle -34.3 -22.0 -6.7 -1.6 Div Payout (%) 50 % 52 % 47 % 47 %
BVPS (Rs) 351.4 383.4 450.8 617.1 WC Turnover -10.6 -16.6 -54.8 -227.3 P/E 23.9 24.8 20.1 0.0
EBITDAM (%) 21 % 19 % 21 % 20 % FA Turnover 9.4 10.0 10.9 10.6 P/B 8.0 7.3 6.2 0.0
PATM (%) 17 % 15 % 18 % 19 % Net D/E -0.3 -0.6 -0.7 -0.7 P/FCFF 69.7 47.8 16.7 44.4
Tax Rate (%) 30 % 31 % 30 % 28 % Revenue/Capital
Employed 2.1 2.0 1.8 1.4 EV/EBITDA 19.1 18.4 15.2 15.8
Sales growth (%) 1 % 7 % 4 % -4 % Capital Employed/Equity 1.0 1.0 1.0 1.0 EV/Sales 3.9 3.5 3.2 3.2
FDEPS growth (%) 9 % -4 % 24 % 0 % Dividend Yield (%) 1.8 % 1.8 % 2.0 % 2.0 %
July 21, 2017 Analyst: AshutoshTiwari [email protected] (+91-8128694112 +91 79-40504017) Page 10 of 12
Before reading this report, you must refer to the disclaimer on the last page.
Equirus Securities
Research Analysts Sector/Industry Email Equity Sales E-mail
Abhishek Shindadkar IT Services [email protected] 91-22-43320643 Vishad Turakhia [email protected] 91-22-43320633
Ashutosh Tiwari Auto, Metals & Mining [email protected] 91-79-61909517 Subham Sinha [email protected] 91-22-43320631
Depesh Kashyap Mid-Caps [email protected] 91-79-61909528 Sweta Sheth [email protected] 91-22-43320634
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Ashdeep Kaur [email protected] 91-79-61909527 Compliance Officer E-mail
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Rating & Coverage Definitions: Absolute Rating • LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap > Rs 5 billion and ATR >= 20% for rest of the companies • ADD: ATR >= 5% but less than Ke over investment horizon • REDUCE: ATR >= negative 10% but <5% over investment horizon • SHORT: ATR < negative 10% over investment horizon Relative Rating • OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon • BENCHMARK: likely to perform in line with the benchmark • UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion.
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Bajaj Auto Ltd. Absolute –REDUCE Relative – BENCHMARK 2% ATR in 14Months
July 21, 2017 Analyst: AshutoshTiwari [email protected] (+91-8128694112, +91-79-40504017) Page 11 of 12
© 2017 Equirus Securities Private Limited. All rights reserved. For Private Circulation only. This report or any portion hereof may not
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Analyst Certification
I, Ashutosh Tiwari, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also
certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
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Bajaj Auto Ltd. Absolute –REDUCE Relative – BENCHMARK 2% ATR in 14Months
July 21, 2017 Analyst: AshutoshTiwari [email protected] (+91-8128694112, +91-79-40504017) Page 12 of 12
A graph of daily closing prices of securities is available at http://www.nseindia.com/ChartApp/install/charts/mainpage.jsp and www.bseindia.com (Choose a company from the list on the browser and select the
“three years” period in the price chart).
Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest
Research Analyst’ or Relatives’ financial interest No
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