Bajaj Auto –Buy- Sharekhan
Bajaj Auto has reported a robust growth momentum in January 2010 on the back of a low base of the last year and incremental volumes of new launches.
The total sales volume in January grew by massive 101% year-on-year (y-o-y) to 266,018 units. The sales volume also grew by a handsome 5.6% on a month-on-month basis indicating an impressive performance by its new launches in the motorcycle segment and a robust growth in the three-wheeler sales.
The motorcycle sales volume went up by a stupendous 112.4% y-o-y to 232,949 units in the month mainly on the back of a strong performance of its key brands-Pulsar and Discover-which clocked in volumes of 71,970 units and 92,035 units respectively. The volumes of brand Pulsar stood at an all-time high on account of incremental volumes of the newly-launched Pulsar 135cc, which clocked in volumes of 28,000 units for the month. The runaway success of these two brands-Pulsar and Discover-led Bajaj Auto see its market share rising stupendously from approximately 21% in January 2009 to ~32% in January 2010.
The three-wheeler sales went up by 50% y-o-y to 32,969 units on account of healthy performance by the recently-launched RE600 cargo carrier. The overall exports for the month also grew by a robust 32.7% y-o-y to 71,695 units on account of healthy demand in the key export markets-Sri Lanka, Bangladesh, Philippines and Africa.
The performance of both the flagship brands-Discover and Pulsar-have been impressive for the month, which led the company gain a major chunk of the market share in the motorcycle segment. Moreover, the company will also launch a new product in the motorcycle segment in April 2010, which we believe would have an incremental impact on the overall volumes for FY2011. In the three-wheeler segment, the company has upgraded its products to meet the new emission norms, which we believe will lead to a strong demand post the implementation of the emission norms.
At the current market price, the stock is trading at 11x its FY2012E earnings of Rs155 and enterprise value (EV)/earnings before interest, depreciation, tax and amortization (EBITDA) of 6x. We maintain our BUY recommendation on the stock with a price target of Rs2,129.
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