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MOSL: BAJAJ AUTO (Neutral)-In-line operating performance-FY20 domestic 2W industry outlook cautious

Bajaj Auto: In-line operating performance; FY20 domestic 2W industry outlook cautious

(BJAUT IN, Mkt Cap USD12.5b, CMP INR3042, TP INR3050, Neutral)

• EBITDA margins flat QoQ despite better mix, favorable commodity prices: Revenues grew 9% YoY to INR74b (our est. INR71.4b), with volume growth of 14% YoY. Realization improved 5.3% QoQ (down 4.6% YoY) to INR62k/unit (our est. INR59.8k/unit) due to favorable mix. EBITDA declined 12.6% YoY to INR11.6b (in-line), implying an EBITDA margin of 15.7% v/s our est. of 16% (-390bp YoY, +10bp QoQ). Higher other income boosted adj. PAT to ~INR10.7b v/s our est. of ~INR10b. FY19 volumes/revenue/EBITDA/PAT grew 25%/20%/3%/10% - largely reflecting for trade-off of margins for market share.
• Management commentary: (a) Despite regional festivals in few states, motorcycle industry retail declined ~10% in Apr’19. (b) Demand environment in domestic market is fluid, especially considering multiple factors are at play. (c) Domestic 3W volumes to grow marginally, while exports will be muted due to issues in Egypt. (d) Company has planned for frequent product actions in existing domestic motorcycle brands in Entry segment (~100cc) and Middle segment (~125cc). (e) Expect EBITDA margins to be stable at 2HFY19 levels.