1 Stock Data Sector Automobile Face Value (Rs.) 10.00 52 wk. High/Low (Rs.) 1525.00/684.00 Volume (2 wk. Avg.) 45000 BSE Code 532977 Market Cap (Rs.mn.) 418298.82 Financials (Rs. in mn.) FY09 FY10 FY11E FY12E Net Sales 88103.6 119209.8 137091.2 157654.9 EBIDTA 11088.9 25535.6 29304.6 33633.0 PAT 6564.8 17010.1 19496.0 22475.4 EPS 45.24 117.51 67.38 77.67 P/E 31.96 12.30 21.46 18.61 Bajaj Auto Ltd BUY F I R S T C A L L R E S E A R C H SYNOPSIS Bajaj Auto Ltd. is the largest exporter of two and three wheelers and the company has a technical tie-up with Kawasaki Heavy Industries of Japan. The company has reported a 59% jump in motorcycle sales to 289,176 units in August. Bajaj has set itself a target of 4 million vehicles, including 1 million exports, in FY 2011. The company announced that the share allotment committee has made the allotment of 144,683,510 equity shares of Rs 10 each as bonus shares in proportion of 1 equity share of Rs 10 each for every 1 equity share of Rs 10 each. The company has launched the new Discover 150, its first bike in the 'Commuter Sports' segment. The new launch is compliant with BS III emission norms. Kawasaki Establishes New Indian Subsidiary to Import and Sell Motorcycles. The company’s net sales and net profit are expected to grow at a CAGR of 21% and 51% over FY09 to FY12E. 1 Year Comparative Graph Bajaj Auto Ltd BSE SENSEX V.S.R. Sastry Equity Research Desk [email protected]Dr. V.V.L.N. Sastry Ph.D. Chief Research Officer [email protected]C.M.P: Target Price: Rs.1445.60 Rs.1735.00 Share Holding Pattern September 24, 2010
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Stock Data
Sector Automobile
Face Value (Rs.) 10.00
52 wk. High/Low (Rs.) 1525.00/684.00
Volume (2 wk. Avg.) 45000
BSE Code 532977
Market Cap (Rs.mn.) 418298.82
Financials (Rs. in mn.) FY09 FY10 FY11E FY12E
Net Sales 88103.6 119209.8 137091.2 157654.9
EBIDTA 11088.9 25535.6 29304.6 33633.0
PAT 6564.8 17010.1 19496.0 22475.4
EPS 45.24 117.51 67.38 77.67
P/E 31.96 12.30 21.46 18.61
Bajaj Auto Ltd
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SYNOPSIS Bajaj Auto Ltd. is the largest exporter of two and three wheelers and the company has a technical tie-up with Kawasaki Heavy Industries of Japan.
The company has reported a 59% jump in motorcycle sales to 289,176 units in August. Bajaj has set itself a target of 4 million vehicles, including 1 million exports, in FY 2011.
The company announced that the share allotment committee has made the allotment of 144,683,510 equity shares of Rs 10 each as bonus shares in proportion of 1 equity share of Rs 10 each for every 1 equity share of Rs 10 each.
The company has launched the new Discover 150, its first bike in the 'Commuter Sports' segment. The new launch is compliant with BS III emission norms.
Kawasaki Establishes New Indian Subsidiary to Import and Sell Motorcycles.
The company’s net sales and net profit are expected to grow at a CAGR of 21% and 51% over FY09 to FY12E.
For the first quarter, the top line of the company increased 66%YoY and stood at Rs.38900.60mn against Rs.23384.70mn of the same period of the last year. The bottom line of the company for the quarter stood at Rs.5901.50mn from Rs.2934.90mn of the corresponding period of the previous year i.e. an increase of 101%YoY.
EPS of the company for the quarter stood at Rs.40.79 for equity share of Rs.10.00 each.
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Expenditure for the quarter stood at Rs.31131.30mn, which is around 63% higher than the corresponding period of the previous year. Raw material cost of the company for the quarter accounts for 66% of the sales of the company and stood at Rs.25561.90mn from Rs.14172.00mn of the corresponding period of the previous year i.e., an increase of 80%YoY. Employee cost stood at Rs.1263.90mn from Rs.1129.10mn. and accounts for 3% of the revenue of the company for the quarter i.e., an increase of 12%YoY.
OPM and NPM for the quarter stood at 22% and 15% respectively from 19% and 13% respectively of the same period of the last year.
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Segment-Wise revenue for the Quarter
Segment Revenue (Rs. million)
Automotive 38900.60
Investments 816.70
Total 39717.30
Less: Inter Segment Revenue 0.00
Net sales/income from Operations 39717.30
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Bajaj Auto issues bonus shares in 1:1 ratio The company announced that the share allotment committee has made the allotment of 144,683,510 equity shares of Rs 10 each as bonus shares in proportion of 1 equity share of Rs 10 each for every 1 equity share of Rs 10 each.
August sales jump 55%
The company has reported a growth of 55% in its monthly sales for August 2010. The company has sold total 3,29,364 units in August 2010 as compared to 2,13,072 units in August 2009.
Motorcycles and three wheelers sales of the company grew by 59% and 34% to 2,89,176 units and 40,188 units, respectively, during the month under review over the year ago period, while Export sales rose by 31% to 98,578 units in August this year from 75,164 units in the same month last year.
New Discover 150cc
Bajaj Auto has launched the new Discover 150, its first bike in the 'Commuter Sports' segment. The new model has been priced at Rs 46,000 (Delhi ex-showroom) the new launch is compliant with BS III emission norms.
The company had set a target of selling 3.6 million two-wheelers in a year with Discover brand alone contributing more than one million units.
Kawasaki Establishes New Indian Subsidiary to Import and Sell Motorcycles
Kawasaki Heavy Industries, Ltd. announced the launch of India Kawasaki Motors Pvt. Ltd. (IKM), its new Indian subsidiary specializing in motorcycle imports and sales. IKM is expecting its release of several supersport, sport and cruiser models primarily in the 250 cc class or greater to drive sales up to around 1,000 units in 2010. Kawasaki entered into a technical assistance agreement with Bajaj Auto Ltd. (BAL) in 1984. Under the agreement, BAL has produced and sold motorcycles in collaboration with Kawasaki. Kawasaki’s new imports and sales subsidiary, IKM will consign the production of CKD motorcycles to BAL’s Chakan plant. The locally made motorcycles will then be sold together with imported complete motorcycles through BAL’s Probiking shops.
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Company Profile Bajaj Auto Ltd. is the largest exporter of two and three wheelers, founded in 1926. The Company has a technical tie-up with Kawasaki Heavy Industries of Japan to produce a range of the latest, state of art two wheelers in India. The brand, Pulsar is continually dominating the Indian motorcycle market in the premium segment. Its Discover DTSi is also a successful bike on Indian roads. The Bajaj Group is amongst the top 10 business houses in India. Its footprint stretches over a wide range of industries, spanning automobiles (two-wheelers and three-wheelers), home appliances, lighting, iron and steel, insurance, travel and finance. The group’s flagship company, Bajaj Auto, is ranked as the world’s fourth largest two and three- wheeler manufacturer and the Bajaj brand is well-known in over a 12 countries in Europe, Latin America, the US and Asia. The Company operates in segments, such as automotive, insurance and investment, and others. It is engaged in various markets, including, motorcycles, two-wheelers and three-wheeler vehicles. On April 9, 2007, Bajaj Auto inaugurated its Greenfield plant with a planned capacity of one million motorcycles per year at Pantnagar, Uttarakhand. In addition, it has presence in the life and general insurance businesses (74% stake in each business) in joint venture with Allianz AG of Germany. Distribution network covers 50 countries with dominant presence in Sri Lanka, Bangladesh, Columbia, Guatemala, Peru, Egypt, Iran and Indonesia. Manufacturing Plants: Bajaj Auto has three plants, two at Waluj and Chakan in Maharashtra and one plant at Pant Nagar in Uttranchal, western India.
• Waluj : Bajaj range of motorcycles and three-wheelers.
• Chakan : Bajaj range of motorcycles.
• Pant Nagar : Bajaj range of motorcycles. Company Products
It is engaged in various markets, including, motorcycles, two-wheelers and three-wheeler vehicles. The products manufactured by the Bajaj Auto include: Two Wheelers
• Avenger 200 DTS-i
• Pulsar 220 DTS-i
• Pulsar 180 DTS-i
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• Pulsar 150 DTS-i
• Discover 135 DTS-i
• Discover DTS-Si
• Platina 125 DTS-Si
• Platina 100
• XCD 135 DTS-Si
• Kristal DTS-i COMMERCIAL VEHICLES
1. Goods Carriers
• Bajaj GC MAX Diesel
• Bajaj GC MAX CNG
• Bajaj RE600.
2. Passenger Carriers
• Bajaj RE 2S
• Bajaj 2S CNG
• Bajaj RE 2S LPG
• Bajaj 4S
• Bajaj RE 4S CNG
• Bajaj RE 4S LPG
• Bajaj RE Diesel
• Bajaj RE GDI
• Bajaj Mega Max.
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Financials Results 12 Months Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) FY09 FY10 FY11E FY12E
Description 12m 12m 12m 12m
Net Sales 88103.60 119209.80 137091.27 157654.96
Other Income 1116.70 1225.00 1347.50 1482.25
Total Income 89220.30 120434.80 138438.77 159137.21
Price/Book Value 4.68 7.14 8.33 5.75 A-Actual E-Expected Charts:
• Net sales & PAT
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• P/E Ratio (x)
• P/BV (X)
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• EV/EBITDA(X)
Outlook and Conclusion
At the market price of Rs.1445.60, the stock is trading at 21.46 x and 18.61 x for FY11E and FY12E respectively.
On the basis of EV/EBDITA, the stock trades at 15.99 x for FY11E and 15.55 x for FY12E.
Price to book value of the company is expected to be at 8.33 x for FY11E and 5.75 x for FY12E respectively.
EPS of the company is expected to be at Rs.67.38 and Rs.77.67 for the earnings of FY11E and FY12E respectively.
The company announced that the share allotment committee has made the allotment of 144,683,510 equity shares of Rs 10 each as bonus shares in proportion of 1 equity share of Rs 10 each for every 1 equity share of Rs 10 each.
The company has reported a 59% jump in motorcycle sales to 289,176 units in August. The company had sold 182,441 units in August last year. Exports went up by 31% to 98,578 units in August, 2010, from 75,164 units in August, 2009.
The company has introduced its new range of 'RE' passenger vehicles -- RE145D and RE445M -- at its Akurdi facility near Pune.
We recommend ‘BUY’ this stock with a target price of Rs.1735.00 for medium to long term investment.
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Industry Overview Introduction: The growth of the Indian middle class along with the growth of the economy over the past few years has attracted global auto majors to the Indian market. India provides trained manpower at competitive costs making India a favoured global manufacturing hub. Propped by the increase in its car sales after the launch of General Motors’ (GM) new model Beat, along with the robust growth in the Indian automobile sector, Kevin E Wale, President and Managing Director, General Motors China Group stated that India should be among the top ten markets for the company globally by 2011. Production: In recent times, India has emerged as one of the favourite investment destinations for automotive manufacturers.
• Nissan Motor India has announced its 'Made-in-India' compact car (hatchback) Nissan Micra at its manufacturing plant at Oragadam, near Chennai. Toshiyuki Shiga, Chief Operating Officer, Nissan Motor Company stated that the India-made Micra will supply to strategic markets such as Europe, Middle East and Africa
• The German luxury car major, BMW has launched four new variants of its new-generation 5-Series sedan in India
• In a bid to capture a bigger share of the ever-expanding consumer base of
luxury segment automobiles in India. Volkswagen has launched its luxury sedan model Phaeton, its latest luxury model
• Hyundai plans to bring forth an upgraded version of i30, latest C segment five-
door hatchback which is designed by Hyundai European team in Germany and is based on the Hyundai i-flow HED-7 hybrid concept. As per the manufacturer, i30U has entered mass production in March 2010 after debuting at the Geneva Motor Show
• Y V S Vijay Kumar, Executive-Vice President, Hindustan Motors India stated
that the company’s Thiruvallur plant has a capacity of 12,000 units and in two years, the company plans to double its manufacturing capacity to reach 24,000 units.
• India's second largest heavy commercial vehicle maker Ashok Leyland Ltd and Japanese car maker Nissan Motor Co. Ltd announced the launch of three light commercial vehicles (LCVs) from 2011 through 2013
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• According to Andrew Palmer, senior vice-president, Nissan, the company will start marketing a light commercial vehicle (LCV) under its brand name, from its Oragadam plant near Chennai, in the second half of 2011
• Honda Motorcycle and Scooters India (HMSI), the Indian subsidiary of Japanese
auto giant Honda Motor Corporation, will launch its superbike 2010 VFR 1200F in India by December 2010, according to a HMSI executive
Domestic Market/ Sales:
• According to the Society of Indian Automobile Manufacturers (SIAM), overall vehicle sales grew 30 per cent in May 2010 to 1,208,851 units, and 8 per cent over the previous month of April 2010. Two wheeler sales rose 29 per cent, with motorcycle sales increasing 26 per cent to 725,311 units, and scooter sales rising 45 per cent to 157,509 units in May 2010. Commercial vehicle sales rose 58 per cent in May 2010.
• According to SIAM, the medium and heavy commercial vehicle (M&HCV) segment registered a growth of 33.5 per cent at 245,058 units and total commercial vehicle (CV) sales went up by 38.3 per cent to 531,395 units in 2009-10. At an estimated 25 per cent growth, while the M&HCV segment would be about 306,000 units, total CV sales would be about 664,000 units in 2010-11.
• Passenger vehicles sales alone grew by 33.93 per cent in the month of April
2010 as per SIAM report. The growth within this segment was largely driven by a 39.48 per cent growth witnessed in passenger car sales whereas exports continue to grow stronger for the industry as overall exports posted a growth of 87.61 per cent as reported by SIAM.
• Furthermore, the three wheelers segment witnessed a sales increase of 20.41
per cent in April 2010 over April 2009. Two wheeler segment also continued the growth trend registering an upswing of 22.07 per cent at 8,55,670 in April 2010 compared with 7,00,987 in the corresponding period of last year.
• Mahindra and Mahindra (M&M) became the world's number one tractor
company by selling a record of 1.59 lakh tractors in 2009 surpassing John Deere of the US.
Road Ahead: R Seshasayee, managing director, Ashok Leyland, stated that the company plans to invest around US$ 436.6 million over the next two years. The commercial vehicle major said it had earmarked US$ 262 million for capex in addition to investments earmarked for the various joint ventures (JVs) to the tune of US$ 174.7 million. The market for electric vehicles, particularly two-wheelers or e-bikes, is expected to grow with the governments at the Centre and states offering fiscal incentives and as awareness about the ecological benefits of using these vehicles spreads, according to
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Ms Hemalatha Annamalai, Founder and Chief Executive Officer of Ampere Vehicles Pvt Ltd (AMPVL), Coimbatore. Furthermore, following the initiative taken by the Society of Manufacturers of Electric Vehicles (SMEV), the government has given duty concession on the import of certain key components needed by the industry. In addition, the Tamil Nadu Government has also reduced Value Added Tax (VAT) from 12.5 per cent to four per cent benefitting the industry. Pune-based Automotive Research Association of India (ARAI) and DSM of the Netherlands have entered into an alliance to develop new lighter materials that could substitute metals in the automotive industry, and help auto components shed weight. According to the Society of Indian Automobile Manufacturers (SIAM), total commercial vehicle (CV) sales is estimated to grow to 664,000 units in 2010-11, while the medium and heavy commercial vehicle (M&HCV) segment would be about 306,000 units. The Indian automotive industry is all geared up for a roller coaster journey of growth and there is every reason to remain positive about the Indian auto sector in the future.
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