MOSL: BAJAJ AUTO (Buy)-Operating performance in-line, higher other income boosts PAT

Bajaj Auto: Operating performance in-line, higher other income boosts PAT

(BJAUT IN, Mkt Cap USD11.6b, CMP INR2720, TP INR3450, 27% Upside, Buy)

• Price hikes, favorable mix drives realizations: Net sales grew 38.3% YoY (6.3% QoQ) to INR67.7b (in-line), as volume grew 32.7% YoY (4.4% QoQ). Realization grew 1.9% QoQ (4.2% YoY) to INR64.8k (our estimate: INR63.7k), largely led by price hikes of 1-1.5% in 2W and 3W. A favorable product mix (higher share of 3W, exports) also helped YoY realization growth.
• EBITDA margin in-line at 19.4% (est 19.1%): Gross margin was 30.7% (our estimate: 31.3%), primary led by RM inflation. However, other expense shrunk 180bp YoY (-90bp QoQ) to 7.4% (our estimate: 8.4%) to INR5b (our estimate: INR5.6b). EBITDA grew 45% YoY (6.8% QoQ) to INR13.2b (in-line), implying EBITDA margin of 19.4% (+90bp YoY, +10bp QoQ). Other income grew 25% YoY (62% QoQ) to INR3.7b (our estimate: INR2.2b) due to MTM gain of ~INR700m. PAT grew 34.7% YoY (13.4% QoQ) to INR10.8b (our estimate: INR9.8b). FY18 revenue/EBITDA/ adjusted PAT grew 15.6%/8.2%/7.3%.