MOSL: BAJAJ AUTO (Buy)-Discounts, RM cost, CSR impact margins-guides export recovery in FY18
​Bajaj Auto: Discounts, RM cost, CSR impact margins; guides export recovery in FY18
(BJAUT IN, Mkt Cap USD13.4b, CMP INR2974, TP INR3422, 15% Upside, Buy)
- Volume decline drags revenue: Net sales declined 8.6% YoY (and 3.3% QoQ) to INR48.9b (in-line), as volume fell 9.7% YoY (and 7.5% QoQ) on account of slow recovery post demonetization and export headwinds. Realization increased 4.5% QoQ (and 1.2% YoY) to INR62.1k/units due to higher share of premium motorcycles, but partly offset by lower exports and 3W volumes. For FY17, net sales declined 3.6% to INR217.6b, led by 6% volume decline. For FY18, the management guided double-digit growth in exports.
- EBITDA margin below estimate on higher discounts, RM cost: EBITDA at ~INR9b (our estimate: ~INR10b) declined 21% YoY, translating into margin decline of 300bp YoY (and 210bp QoQ) to 18.5% (our estimate: 20.5%). This was due to dealer compensation of ~INR160m on BS3 inventory, adverse mix (lower exports) and higher commodity cost due to BS4 production. PAT declined 15.5% to ~INR8b (our estimate: INR8.4b). For FY17, EBITDA margin declined 90bp to 20.3% and PAT declined 2.6% to INR38.3b.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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