buying and selling shares in India bajaj auto stock

Bajaj Auto Ltd (updated - 24 June 2009)
Bajaj Auto has launched a new variant of the Pulsar 220 at a price of approximately Rs 70,000, exshowroom at the premium end. The Pune-based firm has, for a long time, had a strong market presence in the premium segment though, of late, the competition has increased resulting in the Pulsar giving up some market share. While the premium segment is a profitable space to be in, it accounts for just about 1012 per cent of the motorcycle market. So, even if Bajaj Auto is the market leader, it cannot sell meaningful volumes. For that to happen, it must do well in the executive segment.

The XCD 135cc has done well and the company has clocked reasonably good volumes in the first two months of 2009-10, after a disappointing 2008-09. A new launch in the executive space is scheduled for July.

Having decided not to play the entry segment (100cc) because of its low profitability, its important that Bajaj Auto gets a grip on the executive segment. Industry watchers say this segment would account for athird of the market, compared with around 2829 per cent at present. Since the start of the year, the stock has outperformed the benchmark indices by a huge margin though it has corrected somewhat from 1,133 earlier this month to Rs 939 currently. At this price, it trades at just over 14 times estimated 2009-10 earnings.
source - BS

Disclaimer: Information presented on this site is a guide only. It may not necessarily be correct and is not intended to be taken as financial advice nor has it been prepared with regard to the individual investment needs and objectives or financial situation of any particular person. Stock quotes are believed to be accurate and correctly dated, but does not warrant or guarantee their accuracy or date.
Our site takes no responsibility for any investment decisions based on recommendations provided on website.

Bajaj Auto Ltd (updated - 03 April 2009)
It’s been a great start for Bajaj Auto’s XCD 135cc with the motorcycle clocking volumes of more than 20,000 units each in the first two months of its launch. That has helped the Pune-headquartered firm to close 2009-10 on a better than expected note, with sales of close to 2 million bikes.

With a few more launches on the cards, Bajaj Auto should be able to win back some of the share it has lost in last couple of years. The strategy of playing the more profitable 125 cc plus segment is not a bad one because this space is expected to grow further –it currently accounts for about 30 per cent of the market.

The question is how soon it will start paying off and whether volumes will sustain. Both Yamaha and Honda Motorcycles seem to be doing fairly well while Hero Honda too continues to grow, although some of its recent success is due to a large presence in the 100 cc segment. Also Hero Honda hasn’t announced any new launches in the 125cc plus segment though that doesn’t mean there aren’t any in the pipeline. Nevertheless, it won’t be all that easy for Bajaj Auto to make a comeback because banks still appear reluctant to fundpurchases of two wheelers.

However, the company should see improved profitability this year because it will sell fewer of the small bikes and besides, raw material prices have eased. Since January, the stock has rallied 57 per cent but at Rs 642, it trades at around 10.5 times estimated 200910 earnings and near term upsides appear to have been factored in.
source - BS

Bajaj Auto Ltd (updated - 22 May 2009)
It is possible that Bajaj Auto’s profitability will improve in the current year because of better volumes - expected to be up 10 per cent, a product mix that’s more in favour of high-priced bikes as also the full impact of falling raw material costs. Moreover, the bottom line should get a boost from aweaker rupee given that exports account for around 30 per cent of the turnover.
At the current price of Rs 934 — the stock rallied 5.6 per cent on Thursday — the stock trades at 13.5 times estimated 2009-10 earnings (ex-financial and ex-VRS). Even if the earnings are better, the stock would be only slightly cheaper at 13 times, which is higher than the historical average. For perspective, rival Hero Honda trades at 15 times estimated 2009-10 earnings.

For sure, things may be looking up for Bajaj Auto with the XCD 135cc doing well so far to clock an average of 20,000 bikes a month and the run rate likely to improve in the coming months. But a re-rating of the stock isn’t justified and can only happen if the next launch in the executive segment, scheduled for July, is a winner. At the end of the day, Bajaj Auto needs to prove that it can deliver volumes, on a sustained basis in the executive segment.

Having decided to vacate the entry segment (100cc), it needs to get a grip on the executive segment, which industry watchers believe would account for over a third of the market. Currently, this space has a share of around 28-29 per cent, and given that the consumers do have purchasing power, the executive segment could see momentum. In the premium space, in which Bajaj Auto has been the leader, the Pulsar has yielded some share to Yamaha but a Pulsar variant is being launched next month. In any case, the premium segment accounts for just about 10-12 per cent of the motorcycle market, and although it’s a profitable space to be in, it’s in the executive space that Bajaj Auto needs to sell volumes.
source - BS

Bajaj Auto Ltd (updated - 17 July 2009)
Bajaj Auto’s June quarter profit of Rs 293 crore was boosted by foreign exchange gains of Rs 100 crore. Better realisations from exports helped the top line stay flat at Rs 2,259 crore year-onyear despite volumes falling about 10 per cent. Sequentially, the revenue is up about 20 per cent.

After losing market share in the domestic motorcycle market for the last five quarters or so, the Pune-based firm’s share is up about 300 basis points to 25 per cent. Moreover, due to lower raw material prices, the operating profit margin for the June quarter has expanded to 16.6 per cent.

These benefits should continue in the current year and analysts believe that the operating margin for the year could be in the region of 16-17 per cent. Of course, margins would be driven by better volumes —expected to go up by about 4-5 per cent — and a better product mix. Bajaj should be able to cash in on the 9-10 per cent growth expected for the domestic motorcycle industry this year, most of which will be driven by pent-up demand, easier credit conditions and increased rural penetration.
Much will depend on the company’s new launch in the 100 cc segment, a space that it is revisiting.

This segment is dominated by Hero Honda, which has close to 90 per cent share. Besides, competition in executive and premium segments remains strong with players like Honda Motorcycles and Yamaha doing well. Having lost some of its franchises in the last couple of years, Bajaj Auto could find it difficult to win back its market share.

Nevertheless, revenues could rise 7-8 per to Rs 9,500 crore this year, over the Rs 8,810 crore posted in 2008-09. The stock has been an outperformer over the past few months but at the current price of Rs 1,150 trades at just about 14 times estimated 2009-10 earnings, while at Rs 1,538, Hero Honda, a much stronger player, trades at just over 15 times. Clearly, Bajaj should trade at a bigger discount to Hero Honda.
source - BS

Bajaj Auto Ltd (updated - 22 Sept 2009)
With the Discover 100 cc a big success, the Bajaj Auto stock has been abig mover in September, gaining 19 per cent to the Sensex’s 8 per cent. The Pune-based firm has sold 100,000 bikes in less than two months of the launch, taking on Hero Honda, the unquestioned leader in the space with a share of over 80 per cent.

Industry watchers say Bajaj Auto has priced the bikes competitively at levels of Rs 40,000, making them cheaper than Hero Honda’s bikes and that should have pulled customers apart from the mileage and technology. Besides, lower interest rates and some attractive financing schemes in an improving macroeconomic environment in urban markets would have helped the company push sales.

It is possible Bajaj Auto has taken away some share from Hero Honda. However, operating margins on entry-level bikes are usually low compared with those for executive or premium bikes, and therefore, volumes will have to be large for the company to make meaningful money.

Nevertheless, return to the 100cc space appears to have been a good idea and if the Discover 100cc can sustain a run-rate of 20,000 bikes a month, the effort would have paid off. Meanwhile, the management is also focussing on the Pulsar in the premium segment-a space in which it has been the market leader.

After losing market share in the domestic motorcycle market for the last five quarters or so, Bajaj Auto gained about 300 basis points in the June quarter to push up its share to 25 per cent.

Besides, the operating profit margin (OPM) expanded to 16.6 per cent and with raw material prices still benign, analysts believe the OPM this year could end up at 16-17 per cent. At Rs 1,679, Hero Honda trades at 19 times estimated 2009-10 earnings while at Rs 1,454, Bajaj Auto trades at around 18 times.
source - BS

Bajaj Auto Ltd (updated - 16 Oct 2009)
Bajaj Auto’s return to the 100cc segment is paying off. With the new 100cc Discover a hit, the Pune-headquartered company’s sales for the September 2009 quarter are up a smart 15 per cent to Rs 2,793 crore. Within a short period, since midAugust, the company managed to sell 160,000 Discover bikes, which drove volumes for the maker of two- and threewheelers.

The market leader in the 100cc space is Hero Honda, with a share of close to 80 per cent. With the Discover being competitively priced, Bajaj could eat into Hero Honda’s share.

Bajaj Auto is doing well in overseas markets too; export volumes of both two- and three wheelers in the September 2009 quarter were up 8 per cent year-onyear. The only concern on the export front is the strengthening rupee since exports now account for about 30 per cent of the company’s sales.

Meanwhile, operating profit margins in the September 2009 quarter were up nearly 800 basis points to 22 per cent with the company selling more high-margin models and thereby earning better realisations. Of course, the lower raw materials bill helped. For the current year, operating margins could come in at close to 20 per cent since prices of some inputs are going up. However, the company expects to save on marketing spends.

Meanwhile, it remains the market leader in the premium space with the Pulsar range (150cc-220 cc) continuing to do well, though there is some competition from both Hero Honda and Honda Motorcycles. What Bajaj has going for it is a strong cash balance of Rs 1,652 crore. Despite the fairly good numbers, the stock came off with the Street anxious that higher raw material prices could impact margins.
source - BS

Bajaj Auto Ltd (updated - 11 Dec 2009)
Bajaj Auto’s decision to exit its five-decade-old scooter business by March doesn’t seem to have surprised the markets considering that the share prices of both Hero Honda and Bajaj Auto have shown similar trends in the last two days.

The reason for Bajaj’s exit from the scooter segment looks pretty obvious. Even as the over one million unit domestic scooter industry has grown between 10 and 15 per cent annually, Bajaj’s scooter sales have not been impressive for a long time. For the eight months of 2009-10, it sold 4,084 units of Kristal, its only scooter brand and an automatic variant, compared with 9,332 in the same period ayear ago.

In November 2009 it sold amere 258 units. Overall, scooter sales have accounted for a quarter of a percentage of Bajaj’s total two-wheeler sales in the current fiscal.

Given these minuscule volumes, it would be difficult to even expect the scooter business to make profit. But certainly, the exit from the scooter business would have no significant financial implication for the company.
Analysts say the company has just not focused enough on the segment as it saw larger opportunity in motorcycles, five times the scooter market. Bajaj itself is aiming to become aspecialist and the number one player globally in the motorcycle segment. Also, since motorcycles yield relatively higher profit margins, it makes sense for Bajaj to enhance its focus on the business.

Meanwhile, Bajaj’s new Discover 100cc along with Pulsar bikes has helped sustain volumes of 240,000-250,000 in the last three months. On Wednesday, Bajaj launched a sub-150cc sporty bike, the Pulsar 135LS, aimed at strengthening its position in the executive segment. Analysts say that new product launches and thrust on exports will help Bajaj sustain healthy volume growth ahead, which along with better product mix would help protect margins, even as raw material costs may put some pressure.

At the current price though, the stock trades at a PE of 13 times its estimated 201011 earnings, leaving little room for further appreciation in the near-term.
source - BS