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Prabhudas Lilladher
Bajaj Auto (Accumulate)
CMP: ₹2,357.30
Target: ₹2,525
The Bajaj Group is amongst the top 10 business houses in India. 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 across several countries in Latin America, Africa, West Asia, South and South East Asia. Bajaj Auto’s Q3FY16 performance was healthy despite lower export volumes, both q-o-q and y-o-y. Led by higher realisations and improved gross margins, adjusted EBITDA margin was higher 90 bps y-o-y at 21.2 per cent; EBITDA margin was the second highest in the past nine quarters. Higher-than-expected non-operating income led to adjusted profit being better than expectations at ₹860 crore, a growth of 7.1 per cent y-o-y.
We expect sales volume of 39 lakh units in FY16, which translates into a residual growth expectation of 14.2 per cent in Q4FY16. We have lowered our volume estimates by 4.7 per cent/7 per cent for FY16e/17e and profit estimate at 2.7 per cent/5.1 per cent, respectively.
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