Buy Bajaj Auto Ltd For Target Rs.2660.00 – Firstcall Research Ltd

 

Buy Bajaj Auto Ltd For Target Rs.2660.00 - Firstcall Research Ltd

SYNOPSIS

*  Bajaj Auto Ltd is ranked as the world’s fourth largest two and three wheeler manufacturer and the Bajaj brand is well-known across several countries in Latin America, Africa, Middle East, South and South East Asia.

*  During Q3 FY15, revenue rose by 10.25% to Rs. 56571.70 mn from Rs. 51312.40 mn in Q3 FY14.

*  For Q3 FY15, EBITDA is Rs. 13221.00 mn as against Rs. 13570.20 mn in the corresponding period of the previous year.

*  Bajaj Auto improves its operating EBITDA margin from 20.2% in H1 FY15 to an industry best margin of 21.1% in Q3 FY15.

*  Profit after tax stood at Rs. 8612.40 mn against Rs. 9045.50 mn in Q3 FY14. The Company also reported its 2nd highest Profit before tax of Rs. 12562.60 mn.

*  Exports, by value, recorded a growth of 26% and now contribute ~49% of net sales.

*  During the quarter, Bajaj sold commercial vehicle of over 139,000 units in domestic and international markets, growth of ~32% over Q3 FY14.

*  Bajaj Auto has secured a Repeat Order from Government of Sri Lanka for the supply of 1.25 lakh (numbers) Discover-125M, which the Company expects to execute in next 3-4 months.

*  Cash and cash equivalents as on 31st December 2014 stood at Rs. 75680 mn as against Rs. 83130 mn as on 30th September 2014.

*  Net Sales and PAT of the company are expected to grow at a CAGR of 7% and 5% over 2013 to 2016E respectively.

 

QUARTERLY HIGHLIGHTS (PARENT BASIS) Results updates- Q3 FY15,

Bajaj Auto is world’s fourth largest two- and threewheeler manufacturer, reported its financial results for the quarter ended 31st Dec, 2014.

The company’s net profit stood at Rs. 8612.40 million against Rs. 9045.50 million in the corresponding quarter ending of previous year. Revenue for the quarter rose by 10.25% to Rs. 56571.70 million from Rs. 51312.40 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 29.76 a share during the quarter, registering 4.79% decrease over previous year period. Profit before interest, depreciation and tax is Rs. 13221.00 million as against Rs. 13570.20 million in the corresponding period of the previous year.

 

OUTLOOK AND CONCLUSION

*  At the current market price of Rs.2420.05, the stock P/E ratio is at 23.79 x FY15E and 20.02 x FY16E respectively.

*  Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.101.72 and Rs.120.87 respectively.

*  Net Sales and PAT of the company are expected to grow at a CAGR of 7% and 5% over 2013 to 2016E respectively.

*  On the basis of EV/EBITDA, the stock trades at 12.79 x for FY15E and 11.46 x for FY16E.

*  Price to Book Value of the stock is expected to be at 5.82 x and 4.87 x respectively for FY14E and FY15E.

*  We recommend ‘BUY’ in this particular scrip with a target price of Rs.2660.00 for Medium to Long term investment.

 

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