MOSL: BAJAJ AUTO (Buy)-Higher RM cost, negative operating leverage results in 8-year low margins
​BAJAJ AUTO: Higher RM cost, negative operating leverage results in 8-year low margins
(BJAUT IN, Mkt Cap USD12.7b, CMP INR2819, TP INR3281, 17% Upside, Buy)
- Volume decline drags revenue; 6% YoY realization growth a surprise: Net sales declined 5.3% YoY (grew 11.1% QoQ) to INR54.4b (our estimate: INR52.3b), as volumes declined 10.7% YoY (grew 12.8% QoQ). In the domestic market, lower channel inventory and purchase postponement by customers due to GST impacted wholesale numbers. However, an unexpected ~6% YoY increase (1.5% QoQ decline) in realization to INR61,258/unit (our estimate: +2%) aided revenue. Export revenue grew 20.5% YoY to INR24.8b.
- EBITDA margin at multi-quarter low on higher RM, operating deleverage: EBITDA fell 20% YoY to INR9.4b (our estimate: ~INR10b), implying EBITDA margin of 17.2% (-320bp YoY, -130bp QoQ; our estimate: 19.1%). This was due to higher RM cost (+280bp YoY, +220bp QoQ) and operating deleverage on weak domestic volumes. However, adjusted PAT declined just 3.2% to INR9.5b (our estimate: INR8.8b) due to higher other income. It reported exceptional cost of INR320m related to GST-related compensation to dealers.
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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