Bajaj Auto (Q3 FY13)

India Infoline News Service | Mumbai |

Total volumes were up by 4.9% yoy and 7.5% qoq. Sequential recovery in 3Ws continued and the festive sales boosted the domestic motorcycle volumes in the quarter

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CMP Rs2,072, Target Rs2,107, Upside 1.7%

Revenues at Rs54.1bn higher by 8.6% yoy; exactly in line with our estimates
Blended realizations improved sequentially by 8.9% qoq on back of higher sales of 3W in export market
Total volumes were up by 4.9% yoy and 7.5% qoq. Sequential recovery in 3Ws continued and the festive sales boosted the domestic motorcycle volumes in the quarter
OPM at 18.7% (20bps lower than estimates), was 105 bps down on yoy basis, but improved by 29 bps over Q2 FY13
PAT at Rs8.2bn in line with our estimates
Maintain our rating of Market Performer with a revised 9-month price target of Rs2,107

Result table

(Rs m)	Q3 FY13	Q3 FY12	% yoy	Q2 FY13	% qoq
Total volumes	1,127,741	1,075,441	4.9	1,049,208	7.5
Export volumes	376,222	380,912	(1.2)	390,285	(3.6)
Total realizations (Rs)	51,588	46,361	11.3	47,392	8.9
Net sales	54,127	49,859	8.6	49,724	8.9
Material costs	(37,157)	(33,576)	10.7	(33,560)	10.7
Purchases	(2,053)	(2,040)	0.7	(2,126)	(3.4)
Personnel costs	(1,592)	(1,382)	15.2	(1,532)	3.9
Other overheads	(3,207)	(3,019)	6.2	(3,353)	(4.4)
Operating profit	10,118	9,841	2.8	9,152	10.5
*OPM (%)*	*18.7*	*19.7*	*(105) bps*	*18.4*	*29 bps*
Depreciation	(411)	(321)	27.8	(410)	0.1
Interest	(1)	(0)		(2)
Other income	2,032	1,681	20.9	1,667	21.9
Extra ordinary items	-	(589)		-
PBT	11,738	10,612	10.6	10,407	12.8
Tax	(3,550)	(2,660)	33.5	(3,000)	18.3
*Effective tax rate (%)*	*30.2*	*25.1*	*518 bps*	*28.8*	*142 bps*
PAT	8,187	7,952	3.0	7,407	10.5
*PAT margin (%)*	*15.1*	*15.9*	*(82) bps*	*14.9*	*23 bps*
Ann. EPS (Rs)	113.2	109.9	3.0	102.4	10.5

Source: Company, India Infoline Research

Robust 3W’s exports prop up realizations

The quarter saw sharp improvement in the blended realizations on back of a favorable product mix. While domestic realizations were almost flat, export realizations improved a healthy 9% qoq on back of strong 3W sales. In the export market, 3W volumes jumped 21.5% qoq whereas the motorcycles recorded decline of 8.5% qoq. Total volumes sold in the quarter improved by 7.5% qoq and 4.9% yoy benefiting from the strong festive sales in the domestic market. Better realizations and robust increase in volumes sold translated into a healthy topline of Rs54.1bn implying growth of 8.6% yoy and 8.9% qoq.

Operational Performance

Particulars	Q3 FY13	Q3 FY12	% yoy	Q4 FY11	% qoq
*Motorcycles*
Domestic	687,351	642,395	7.0	601,876	14.2
Export	298,912	304,354	(1.8)	326,648	(8.5)
*Three-wheelers*
Domestic	64,168	52,134	23.1	57,047	12.5
Export	77,310	76,558	1.0	63,637	21.5

Source: Company, India Infoline Research

Slight improvement in market shares in bikes… 3W’s continuing the uptrend…

Post the seasonally weak first quarter for domestic 3W volumes, the sales have been picking up and the surge in bygone quarter volumes indicated fresh licenses being issued. In domestic two wheelers market, the quarter saw some market share loss for HMSI, which implied gains for other players. BAL in the process managed to marginally gain market share (30bps) in the bygone quarter. The mix of the 2W’s sold in domestic market was seen favourable with the >125cc category accounting for 52.1% vis-à-vis 49.9% in Q2 FY13. In two wheeler export market also the mix was favourable, wherein the >125cc category accounted for 43.5% of exported 2W’s vis-à-vis 36.8% in Q2 FY13.

In the year gone by, the export markets of Africa have performed well growing by 12% whereas the Latin American markets have remained flat. The Sri-lankan market has been weak owing to duty hikes on imports and management informed that a further 5% hike was implemented 3W imports in the quarter.

Cost analysis