Dalal Street Investments

Bajaj Auto – Strong Results – Pulsar Performance

May 13, 2010

Bajaj reported 4QFY10 PAT of Rs5.3 bn, comfortably beating our PAT estimate of Rs4.5 bn. The upside was largely operational with EBITDA margins coming in at 22.9% for the quarter compared
to our estimate of 21.5%. The margin upside was driven by better-than-expected realizations and lower other expenditure. Net realizations increased 4% qoq, higher than our expectation of 2%, driven by higher mix of Pulsar brand sales and price increases.

Other expenditure declined 18% sequentially, which the company attributed to better cost control and lower advertisement spend. Labor expenses also declined 7% sequentially, driven by an actuarial gain related to gratuity. Lastly, the tax rate for the quarter came in at 28% compared to 33% we had modeled.

Brand strategy becoming more coherent and consolidating around 2 brands, Discover and Pulsar, which augurs well for future positioning and marks a distinct shift from BJAUT’s product-based strategy.

Bajaj Auto EPS Estimates FY 11 and FY 12:
Goldman Sachs estimates it to be – 159 and 183 with a target of 2530
Kotak Securities – 159 and 173 2330
HSBC – 153 and 171 with a target of 2400


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