Only sustaining above 2550, expect 2655-2695
Q2 PAT at Rs.933 cr (estimate:896.2 & YOY:591) and EPS 32.20
(estimate:31.28 & YOY:32.15)
CMP: 2519
Buy either on sustained break out above 2550 with TSL<2510 or wait for dips around 2440-2400
TGT:2585-2610 & 2655-2695 (T+30)
TGT: 2815-2900 & 3300-3500 (12-24M)
TSL<2380
Note: Consecutive closing below 2380 for any reason, Bajaj Auto can fall up to 2330-2290-2210, where it may be again accumulated for better investment buying average.
Some key takeaways:
Q2FY16 PAT of Bajaj came around Rs.933 cr, up by almost 57.8% from Rs.591 cr (YOY). But there was an one time exceptional expense of Rs.340 cr last year on account of National Calamity Contingent Duty (NCCD) by Uttarakhand Govt.
As par the management, considering that 340 cr, comparable PAT last year was Rs.853 cr (591+340=931-Tax). Analysts were expecting a PAT of around Rs.896 cr this time.
But nevertheless, the Q2FY16 result was good although net sales remained flat. The good result was aided by better product mix, lower input costs, strong operational performance,surge in other income and improved rupee returns on exports. It sold more high margin premium bikes (Pulsar) and autos.
Bajaj Auto managed to improve its margin by better operational metrics despite volume pressure, high competition in the industry and tepid rural demand this year.
The company sees improved festival demand, and focusing more on its premium segment(Pulsar/Avenger/KTM) apart from its regular brands (CT100/Platina), specially for urban young India. The company is shortly launching three new variants of its premium bike "Avenger" to take advantage of the ongoing festival season and forthcoming 7-th pay commission induced liquidity and as par reports, it will launch another mid priced bike in Q4 and sports bike (KTM variants/CS-100/200/400) in 2016. The company is expecting substantial jump in its bike sales after the new launches in the coming months.
Apart from domestic market, Bajaj Auto has also good export market ((Egypt, Nigeria, Sri Lanka) and around 47% of its sales volume came from exports in Q2. It has also managed its cross currency risks quite well.
Bajaj also has excellent market for its high margin 3-W segment where demand is rising steadily in metro and urban areas. But E-Rickshaws (battery operated) is a growing threat to some extent. The management is also expecting new auto permits in Maharashtra (150000) and other parts of the country and subsequent surge in sales in 3-W in the coming days.
Unlike Hero Motors, Bajaj Auto has much better export market and has better product mix in high margin premium & CV-3W which are more suitable for urban India, where there may be a visible uptick in demand in the near future. Rural demand may take some more time for a meaningful improvement. Nevertheless, rural & festive demand is very important for both the companies.
But considering the time & price action on the Bajaj Auto scrip, the above sets of good story might be already discounted to a great extent. Now post result concall may guide the analysts for further ratings of the stock.
In any case, looking at the chart, only consecutive closing above 2550 from the present level, the scrip may target 2655-2695 area in the near term, otherwise expect some corrections up to 2440-2400 zone.
As par BG metrics & current market parameters for Bajaj Auto :
Present median valuation may be around: 2550 (FY:15)
Projected fair valuations might be around: 2800-3000-3300 (FY:16-18)
| SCRIP | EPS(TTM) | BV(Act) | P/E(AVG) | Low | High | Median | 200-DEMA | 10-DEMA |
| BAJAJ-AUTO | 118.5 | 327.58 | 23 | 2520.50 | 2579.43 | 2549.96 | 2330.92 | 2441.18 |
| BAJAJ-AUTO | 140.3 | 365.5 | 23 | 2742.56 | 2806.68 | 2774.62 | 2330.92 | 2441.18 |
| BAJAJ-AUTO | 162.95 | 407.3 | 23 | 2955.66 | 3024.76 | 2990.21 | 2330.92 | 2441.18 |
| BAJAJ-AUTO | 195.5 | 455.15 | 23 | 3237.43 | 3313.12 | 3275.28 | 2330.92 | 2441.18 |
Analytical Charts:
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