Q2FY20 results
Key positives: Higher than expected realisations and low RM cost
Key negatives: Higher other expense
Impact on earnings: We raise our FY20/FY21 estimates by ~9%/6% to account for a lower tax rate and lower revenue growth.
Valuations & view
In the near term, Bajaj Auto with its high share of exports (~40% of total revenues) is better placed than its peers to weather the slump in the domestic market. However, we continue to have concerns with the company’s weakening domestic motorcycle portfolio, the potential disruption from electric 3Ws and the impact of BSVI on volumes. The current valuations at ~19xFY21 are not comforting. Maintain Underperformer with a target price of Rs2900 (17XFY21 EPS).
Bajaj Auto is an auto-manufacturing company which is based in India. Co. is engaged in the manufacturing, selling, and exporting of two- and three-wheeler vehicles and spare parts and accessories. Co.'s products include scooters, motorcycles, and mopeds, as well as autorickshaws, such as goods carriers, delivery vans, and passenger carriers. Co. also provides related spare parts and after sales service. Co. offers its products through a network of dealers and maintains a presence in over a dozen countries in Europe, Latin America, the U.S. and Asia.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
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