BQ Blue’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.
ICICI Securities Report
Bajaj Auto Ltd.’s Q1 FY21 operating numbers were a beat on consensus estimates even as sales declined approximately 60% YoY as Ebitda margin came in at 13.3% (down only 218 basis points). Tight cost control (Rs 10 billion cost reduction in Q1 FY21 ex-advertising and promotion) coupled with strong gross margins (32.9%/462 basis points up) led to the beat. Bajaj Auto is likely to benefit from improving exports profitability and enhanced focus on profitable domestic motorcycle market share (20.7% in Q1 FY21) growth strategy.
In the near term, as economic challenges in Africa, particularly Nigeria, ease, export growth momentum is likely to pick-up in H2 FY21. The key risk remains (both near/medium term) on three-wheelers business driven by Covid risks (avoidance of public transportation), growing popularity of e-rickshaws. We model in improved margins (16.8% in FY22) leading to approximately 8% earning per share compound annual growth rate (EPS CAGR) FY20-22.
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