Bajaj Auto: Maintain ‘buy’, co posts 26.1% revenue growth

BAL has reported PAT of ~Rs 13.3bn (up 2% YoY) and declared dividend of Rs 140/share.

Bajaj Auto’S (BAL) Q4FY21 margins have been a beat on consensus expectations at 17.7% (down 65bpsYoY). BAL’s margin resilience was pushed by rise in export combine (up 340bpsYoY at 46.4%) and elevated share of Pulsar-125cc has led to superior home motorbike combine (share up 13.7% to 26.3%). Management’s deal with constructing on electrical automobiles beginning with Chetak is a long run constructive. They consider current incumbents are nicely positioned by way of know-how distribution and model to deal with the potential entry of PE-backed start-up firms in 2Ws. We consider BAL’s key drivers of profitability stay exports demand in commodity markets (e.g. Africa, LatAm), exports incentives/FX advantages, c) premiumisation in home market. The inventory stays engaging at <15x PE /5.4% FCF yield on FY23E foundation. We keep ‘buy’.

Key highlights of the quarter: BAL has reported 26.1% YoY development in income as ASP rose 6.9% to ~Rs 73.5k/unit supported by product combine, value hikes (~2%). EBITDA margin contracted ~65bpsYoY regardless of tight management on worker prices (down 145bpsYoY) and different bills (down 131bpsYoY). Gross margin contracted 341bps because of larger RM prices as commodity basket costs edge larger (~4% inflation in This autumn). BAL has reported PAT of ~Rs 13.3bn (up 2% YoY) and declared dividend of Rs 140/share.

Key takeaways from earnings name: Management indicated, Second highest exports (~Rs 40 billion); BAL offered highest ever Pulsar bikes with 125cc variant main the expansion (128k models in 4Q), with ~77% gross sales from geographies the place BAL enjoys management place; BAL’s technique on electrification is targeted on market growth by way of product and never by discounting which as per them would make the enterprise mannequin unsustainable; home CV demand is step by step selecting up.

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