Bajaj Auto

Please refer to important disclosures at the end of this report 1

Y/E March (Rs cr) 1QFY11 1QFY10 % chg (yoy) Angel est. % Diff

Net sales 3,890 2,338 66.4 3,870 0.5

Operating profit 777 455 70.6 780 (0.4)

EBITDA (%) 20 19 50bp 20 (18)bp

Reported PAT 590 294 101.1 527 12.0

Source: Company, Angel Research

Bajaj Auto (BAL) posted strong set of numbers for 1QFY2011. The company’s top line was in line with our expectations, while bottom line was above our estimates because of higher other income. High growth was also aided by higher operating leverage and robust volume growth in the domestic as well as export markets. Capacity constraints, however, restricted volume growth to a certain extent. We maintain our positive stance on BAL. We revise our estimates upward to account 1) higher other operating income (higher export incentives) 2) higher operating margin and 3) higher other income on increased liquid investments.

Performance above estimates: For 1QFY2011, BAL registered 66% yoy growth in net sales to Rs3,890cr (Rs2,338cr), marginally above our expectations. The uptick in volumes was aided by new offerings on the Discover and Pulsar platforms. BAL’s two-wheeler segment grew by robust 71% yoy, while the three-wheeler segment grew by 58%. EBITDA margins were also in line with our expectations at 20%, up 20bp yoy. Net profit spiked to Rs590cr, up 101% yoy and above our expectations. Higher other income, improved operating leverage and a dip in exceptional items (VRS expenditure), on a yoy basis, aided bottom-line growth.

Outlook and Valuation: At the CMP of Rs2,469, the stock is trading at 14.3x FY2012E earnings, in line with industry leader Hero Honda. We continue to prefer BAL over Hero Honda in the two-wheeler segment. Hero Honda’s domestic market share in the motorcycles segment has dropped to 54% in June 2010 from 62% in June 2009. With new launches from HMSI, TVS and Yamaha available for sale, Hero Honda’s market share could decline further. Until this happens, we see Bajaj outperforming Hero Honda on the volume and profit fronts in FY2011. We recommend Accumulate on BAL with a Target Price of Rs2,762.

Key Financials Y/E March (Rs cr) FY2009 FY2010 FY2011E FY2012E

Net sales 8,810 11,921 15,926 17,859

% chg (2.3) 35.3 33.6 12.1

Adj. net profit 769 1,784 2,251 2,497

% chg (4.9) 132.0 26.1 11.0

OPM (%) 11.1 20.2 19.5 19.0

Adj. EPS (Rs) 53.2 117.7 155.6 172.6

P/E (x) 46.4 21.0 15.9 14.3

P/BV (x) 19.1 12.2 8.1 5.9

RoE (%) 44.5 74.4 61.3 47.9

RoCE (%) 26.7 58.8 59.1 49.4

EV/Sales (x) 3.9 2.7 1.9 1.6

EV/EBITDA (x) 36.0 13.7 10.2 8.8

Source: Company, Angel Research; Note: The numbers are not adjusted for bonus

ACCUMULATE CMP Rs2,469 Target Price Rs2,762

Investment Period 12 Months

Stock Info

Sector

Bloomberg Code BJAUT@IN

Shareholding Pattern (%)

Promoters 49.7

MF / Banks / Indian Fls 14.7

FII / NRIs / OCBs 19.0

Indian Public / Others 16.6

Abs. (%) 3m 1yr 3yr

Sensex 2.5 19.0 15.2

Bajaj Auto 17.2 110.5 NA*Note: * Listed on May 26, 2008

Face Value (Rs)

BSE Sensex

Nifty

Reuters Code

Automobile

Avg. Daily Volume

Market Cap (Rs cr)

Beta

52 Week High / Low

10

18,131

5,449

BAJA.BO

35,723

0.7

2,525/1,045

48,926

Vaishali Jajoo 022-4040 3800 Ext: 344

[email protected]

Yaresh Kothari 022-4040 3800 Ext: 313 [email protected]

Bajaj Auto Performance Highlights

1QFY2011 Result Update | Automobile

July 23, 2010

Bajaj Auto | 1QFY2011 Result Update

July 23, 2010 2

Exhibit 1: Quarterly performance

Y/E March (Rs cr) 1QFY11 1QFY10 % chg FY10 FY09 % chg

Net sales (incl. other op. income) 3,890 2,338 66.4 11,921 8,810 35.3

Consumption of RM 2,643 1,465 80.4 8,070 6,463 24.9

(% of sales) 67.9 62.6

67.7 73.4

Staff costs 126.4 112.9 11.9 582.8 537.7 8.4

(% of sales) 3.2 4.8

4.9 6.1

Purchases of goods 125.1 82.1 52.3 213.7 192.2 11.2

(% of sales) 3.2 3.5

1.8 2.2

Other expenses 218.6 223.1 (2.0) 648.3 635.2 2.1

(% of sales) 5.6 9.5

5.4 7.2

Total expenditure 3,113 1,883 65.3 9,515 7,829 21.5

Operating profit 777 455 70.6 2,406 982 145.0

OPM (%) 20.0 19.5

20.2 11.1

Interest 0.6 6.0 (89.4) 6.0 21.0 (71.5)

Depreciation 31.8 33.1 (3.8) 136.5 129.8 5.1

Other income 81.7 23.1 252.9 144.3 122.2 18.1

PBT (excl. extr. Items) 826 440 88.0 2,408 953 152.6

Extr. income/(expense) - 24.0 - (81.7) (114.8) -

PBT (incl. extr. items) 826 416 98.8 2,489 1,068 133.1

(% of sales) 21.2 17.8

20.9 12.1

Provision for taxation 236.0 122.0 93.4 704.9 298.7 136.0

(% of PBT) 28.6 29.4

28.3 28.0

Reported PAT 590 294 101.1 1,784 769 132.0

PATM (%) 15.2 12.6

15.0 8.7

Equity capital (cr) 144.7 144.7

144.7 144.7

EPS (Rs) 40.8 20.3 101.1 117.7 53.2 121.3

Source: Company, Angel Research Exhibit 2: Volume performance

Y/E March 1QFY11 1QFY10 % chg FY10 FY09 % chg

Total volume (units) 928,336 547,664 69.5 2,851,518 2,194,108 30.0

Motorcycles 828,391 482,729 71.6 2,506,845 1,907,810 31.4

Scooters 27 1,693 (98.4) 3,737 11,772 (68.3)

Total two-wheelers 828,418 484,422 71.0 2,510,582 1,919,582 30.8

Three wheelers 99,918 63,242 58.0 340,936 274,526 24.2

Exports (inc above ) 323,899 178,295 81.7 891,098 772,519 15.3



July 23, 2010 3

Top line marginally above expectations, volumes up by 70%: BAL reported 66.4% yoy jump in top line to Rs3,890cr (Rs2,338cr), mainly driven by the substantial 70% yoy increase in total volumes. Discover 100 and Pulsar have been the primary game-changer brands for BAL. Average realisation recorded a decline of about 2.4% yoy during the quarter, primarily due to higher contribution of low-end bikes (Discover) in the sales mix.

The company’s domestic motorcycle sales grew 71% (as against the industry growth of 24%) in 1QFY2011. Higher sales in the three-wheeler segment at 99,918 units (63,242) also supported healthy revenue growth. BAL exported 323,899 (178,295) vehicles, an increase of 81.7% yoy in 1QFY2011. During the quarter, production constraints limited sales to a certain extent. The company expects motorcycle capacity of 300,000units/month to go on stream from 2QFY2011.

In terms of volume market share, the company improved its position in the two-wheeler category by 524bp yoy to 20.8% (15.5%) in 1QFY2011, largely owing to a 745bp yoy increase in the motorcycle segment’s market share to 27% (19.5%). However, the three-wheeler segment’s market share declined to 36.4% (41.2%) in 1QFY2011.

Exhibit 3: Volume-driven sales growth


Exhibit 4: Market share across categories

Source: Company, SIAM, Angel Research

EBITDA expands marginally by 50bp: During 1QFY2011, BAL’s operating margin expanded marginally by 50bp yoy to 20%, largely in line with our estimates. However, the company reported a 289bp qoq decline in EBITDA margin, largely on account of the 275bp qoq increase in raw-material costs, which accounted for 67.9% of net sales.

The increase in margin on a yoy basis was on account of a decline in other expenditure and staff costs by 158bp and 392bp, respectively, during the quarter. Higher volumes of sportier motorcycles, effective cost management and focused sales promotional activities helped the company to perform better than the industry at the operating front. Thus, overall, the operating profit for the quarter increased by 70.6% yoy to Rs777cr (Rs455cr), which largely came in line with our estimates.

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Net Sales (LHS) Net Sales Growth (RHS)

41.2 40.6 40.9 37.5 36.4

19.5 22.6

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July 23, 2010 4

Exhibit 5: 20% EBITDA margin guidance achieved


Exhibit 6: Net profit up 101%, beats estimates


Bottom line at Rs590cr, beats estimates: BAL recorded net profit growth of 101% yoy to Rs590cr (Rs294cr), which was higher than our expectation by 12%, primarily owing to higher other income of Rs81.7cr (Rs23.1cr). Other income comprised treasury income earned on liquid assets of ~Rs3,700cr. Further, improved operating leverage, lower depreciation, reduced tax rate and a dip in exceptional items (VRS expenditure), on a yoy basis, aided bottom-line growth. Conference call: Key highlights

Scenario: The two-wheeler industry continues to perform exceedingly well. Demand is expected to increase further with the festival season approaching. However, the industry is facing constraints on the supply front from ancillary manufacturers and original equipment manufacturers (such as manufacturers of bearings and tyre tubes). Capacity constraints are limiting two-wheeler production to a certain extent. Further, meeting demand is a concern with current inventory at lower levels. However, post the festival season, demand is expected to come down to normal levels.

Production: The company expects to sell four million units during FY2011E in the two-wheeler and three-wheeler categories. The additional two-wheeler capacity by 100,000 units/month from the Pantnagar plant is expected to go on full stream from 3QFY2011E. During 1QFY2011, the company produced ~73,000 units/month and expects to ramp it up to ~85,000 units/month by 2QFY2011E. Of the additional capacity that has gone on stream, ~30% would be utilised towards production of Platina and the remaining for Discover and Pulsar. The company sees a potential of ~200,000 units/month for Discover and Pulsar and ~35,000 units/month for Platina. Currently, BAL is running out of stock for Discover 100, Discover 150 and Pulsar 150.

On the three-wheeler front, the company is seeing additional demand 30,000–35,000 units from Tamil Nadu as the permit system in the state has been abolished. Even on the exports front, demand remains robust. However, the company intends to meet the domestic demand with priority and maintain a balance between exports and domestic sales. With TVS Motor entering the three-wheeler space, the market has become competitive and BAL continues to lose market share; however, overall sales volumes for the company continue to increase.

19.5 22.0 22.0 22.9 20.0

64.8 64.7 67.7 68.0 70.7

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July 23, 2010 5

Price increases: In April and June 2010, BAL increased prices across its two-

wheeler brands (Platina, Discover and Pulsar) by Rs500–1,500. In the three-

wheeler segment, prices were increased by Rs2,000 in April 2010. The

company has also increased prices in the export market. Going forward, BAL

seems comfortable and does not feel any need to take action on the pricing

front.

Raw-material cost: BAL expects raw-material costs to decline marginally in

2QFY2011E qoq. However, the raw-material cost pressure is expected to be

higher on a yoy basis. The company has re-negotiated raw-material contracts

(steel and aluminium) at reduced price levels compared to 1QFY2011.

EBITDA margins: As per the management, EBITDA margins of ~20% look

extremely comfortable. EBITDA margins, which came in at 20% for

1QFY2011, were impacted by higher raw-material costs and increased labour

cost due to average yearly wage hike of ~12%. Going ahead, the company is

optimistic about maintaining margins at current levels, as raw-material prices

have cooled down in 1QFY2011 and the impact of labour cost is not expected

to recur. However, EBITDA margins can show a marginal contraction for the

full year because of administration cost and advertising spend, which were

not accounted for in 1QFY2011.

Exports: On the exports front, BAL seems to be extremely bullish and is

targeting one million units for FY2011E. However, looking at the exports

performance for 1QFY2011 (323,899 units, up ~82% yoy), the company may

easily surpass its guidance by ~200,000 units. The company is seeing robust

demand from the Sri Lankan, Egyptian, Colombian, Bangladeshi and African

markets. Within Africa, BAL is witnessing major demand from Nigeria. The

company expects Africa to be the major growth driver for exports and sees

demand growing by 20–25% for FY2011E, while demand from other countries

could be up by 10–15%. BAL enjoys higher margins (~3–4%) from exports

compared to domestic sales. The company has also taken a price increase in

the exports market post July 2010, which would also fetch higher realisations

in the remaining quarters of the current fiscal.

Capital expenditure: BAL expects overall capital investment in the range of

Rs225cr–250cr during FY2011E. The investment would be towards capacity

expansion, research and development and development of new platform for

the four-wheeler project with Renault and Nissan. The overall capacity

available for production by the end of FY11E is expected to be five million

units. It also intends to develop a multi functional platform through which it

can manufacture commercial vehicles (substitute for three-wheeler cargo) and

passenger cars. The development of the new platform will entail an investment

of Rs500cr in a phased manner.


July 23, 2010 6

Subsidiary update: The Indonesian subsidiary, which suffered an overall loss

of Rs38cr (adj. for extraordinary gains) in FY2010, suffered a loss of Rs6cr

during 1QFY2011. The company expects the Indonesian subsidiary to

break-even by FY2012E. It is targeting sales units of 25,000 during FY2011E.

The company has recently launched Pulsar 150 in Indonesia and it has been

received well in the Indonesian market.

Bajaj Auto is also working with KTM (35.2% stake in KTM) to jointly develop

engines and platforms for production. For the nine months ending May’10,

KTM recorded net profits of Euro 3mn. On the consolidated basis

management has indicated that the net profit for the company for FY12E

would be similar to the profits of the standalone entity.

Exhibit 7: Motorcycles – Volume and market share


Exhibit 8: Three-wheelers – Volume and market share


Investment Arguments

Focus on Discover and Pulsar to improve market share: BAL continues to

witness strong demand in the two-wheeler segment from its strong dual

offering of Discover and Pulsar. The successful launch of

Discover 100cc bike in the executive value segment has improved the

company’s market share to 26.7% (about 15% in June 2009) in June 2010.

BAL is positioning itself in line with its strategy of 'value and price products',

wherein it proposes to tap higher-value bike segments, which have a high

growth potential and fetch better realisations. BAL has also launched new

products in the high-margin 125cc+ segment.

Three-wheeler registering healthy growth: BAL has a strong presence in the

three-wheeler market, with an overall market share (including exports) of

around 57%. BAL still tops the passenger auto-rickshaw segment, which

accounts for around 88% of the three-wheeler market. The three-wheeler

segment fetches higher margins than the company’s two-wheeler business.

BAL has lost some market share in the three-wheeler domestic market, but

improving export volumes have more than compensated to post higher

volume growth. We expect the company’s three-wheeler volumes to grow by

11–12% over FY2010–12E.

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July 23, 2010 7

High growth potential in export volumes: BAL registered strong exports CAGR

of 37% during FY2005–10, aided by a 43% CAGR in two-wheeler exports and

a 22% CAGR in three-wheeler exports. Going ahead, with strong traction in

the recent months, we estimate BAL to register a 21% CAGR over

FY2010–12E, driven by higher penetration in the African market. Bajaj has

also hedged around 75% of its FY2011 exports at a USD–INR rate of Rs47.

Hence, any sharp appreciation of the rupee in FY2011 will not have a

significant impact on the company’s margins.

Outlook and Valuation

We maintain our positive stance on BAL. We revise our estimates upward to account 1) higher other operating income (higher export incentives) 2) higher operating margin and 3) higher other income on increased liquid investments.

Exhibit 9: Change in estimates

Y/E March (Rs cr) Earlier estimates Revised estimates % chg

FY11E FY12E FY11E FY12E FY11E FY12E

Net sales 14,866 16,836 15,926 17,859 7.1 6.1

OPM (%) 19.4 18.8 19.5 19.0 14 19

EPS (Rs) 142.2 157.1 155.6 172.6 9.4 9.9

Source: Angel Research

At the CMP of Rs2,469, the stock is trading at 14.3x FY2012E earnings, in line with industry leader Hero Honda. We continue to prefer BAL over Hero Honda in the two-wheeler segment. Hero Honda’s domestic market share in the motorcycles segment has dropped to 54% in June 2010 from 62% in June 2009. With new launches from HMSI, TVS and Yamaha available for sale, Hero Honda’s market share could decline further. Until this happens, we see Bajaj outperforming Hero Honda on the volume and profit fronts in FY2011. We recommend Accumulate on BAL with a Target Price of Rs2,762.


July 23, 2010 8

Exhibit 10: Key assumptions Y/E March FY07 FY08 FY09 FY10 FY11E FY12E

Total Volume (units) 2,718,795 2,451,396 2,194,108 2,851,518 3,754,201 4,141,749

Domestic 2,078,860 1,658,230 1,276,427 1,781,748 2,405,360 2,645,896

Export 297,659 481,549 631,383 725,097 957,128 1,071,983

Total motorcycle 2,376,519 2,139,779 1,907,810 2,506,845 3,362,488 3,717,879

Scooters 20,480 21,316 11,772 3,737 0 0

Total two-wheelers 2,396,999 2,161,095 1,919,582 2,510,582 3,362,488 3,717,879

Passenger domestic 138,759 127,379 125,273 164,493 172,718 172,718

Goods domestic 42,374 26,607 10,197 11,534 4,614 4,614

Exports 140,663 136,315 139,056 164,909 214,382 246,539

Total three-wheelers 321,796 290,301 274,526 340,936 391,713 423,870

Total change (%)

Total Volume 19.2 (9.8) (10.5) 30.0 31.7 10.3

Domestic 18.9 (20.2) (23.0) 39.6 35.0 10.0

Export 80.1 61.8 31.1 14.8 32.0 12.0

Total motorcycle 24.2 (10.0) (10.8) 31.4 34.1 10.6

Scooters (82.3) 4.1 (44.8) (68.3) - -

Total two- wheelers 18.2 (9.8) (11.2) 30.8 33.9 10.6

Passenger domestic (1.8) (8.2) (1.7) 31.3 5.0 0.0

Goods domestic 19.7 (37.2) (61.7) 13.1 (60.0) 0.0

Exports 86.9 (3.1) 2.0 18.6 30.0 15.0

Total three- wheelers 27.7 (9.8) (5.4) 24.2 14.9 8.2


Exhibit 11: Angel v/s consensus forecast

Angel estimates Consensus Variation (%)

FY11E FY12E FY11E FY12E FY11E FY12E

Top Line (Rs cr) 15,926 17,859 14,734 16,628 8.1 7.4

EPS (Rs) 155.6 172.6 145.3 164.7 7.1 4.8

Source: Company, Angel research, Bloomberg


July 23, 2010 9

Exhibit 12: One-year forward P/E band

Source: Company, Angel Research, Bloomberg

Exhibit 13: One-year forward P/E chart


Exhibit 14: BAL - Premium/Discount to Sensex P/E


Exhibit 15: Auto stocks v/s Sensex


Exhibit 16: Automobile - Recommendation summary

Company Reco. CMP

(Rs) Tgt Price

(Rs) Upside

(%) P/E (x) EV/EBITDA (x) RoE (%) FY10-12E EPS

FY11E FY12E FY11E FY12E FY11E FY12E CAGR (%)

Ashok Leyland Neutral 73 - - 17.7 14.9 11.9 10.3 14.5 16.0 30.4

Bajaj Auto* Accumulate 2,469 2,762 11.9 15.9 14.3 10.2 8.8 61.3 47.9 21.1

Hero Honda Accumulate 1,958 2,102 7.4 16.3 14.9 11.9 10.6 56.1 49.7 8.4

Maruti Suzuki# Under Review 1,358 - - 14.7 12.9 7.6 6.0 19.1 17.7 10.4

M&M Accumulate 627 704 12.3 15.8 13.8 10.9 9.5 25.1 23.9 13.9

Tata Motors Accumulate 837 907 8.3 14.3 11.6 7.4 6.7 25.0 26.3 26.5

TVS Motor* Neutral 131 - - 18.1 13.3 9.4 8.0 18.8 22.9 64.0

Source: Company, Angel Research; Note: * The numbers are not adjusted for bonus; # Earnings estimates are under review

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July 23, 2010 10

Profit & Loss Statement Y/E March (Rs cr) FY07 FY08 FY09 FY10 FY11E FY12E

Gross sales 10,639 9,690 9,050 12,118 16,746 19,214

Less: Excise duty 1,322 1,030 613 610 1,340 1,921

Net Sales 9,317 8,660 8,437 11,509 15,407 17,293

Other operating income 228 359 373 412 519 567

Total operating income 9,545 9,019 8,810 11,921 15,926 17,859

% chg - (5.5) (2.3) 35.3 33.6 12.1

Total Expenditure 8,146 7,855 7,829 9,515 12,820 14,459

Net Raw Materials 6,893 6,618 6,463 8,070 11,093 12,485

Other Mfg costs 249 216 192 214 325 365

Personnel 340 444 538 583 508 562

Other 664 577 635 648 894 1,046

EBITDA 1,399 1,164 982 2,406 3,106 3,401

% chg - (16.8) (15.7) 145.0 29.1 9.5

(% of Net Sales) 14.7 12.9 11.1 20.2 19.5 19.0

Depreciation & Amortisation 190 174 130 136 143 161

EBIT 1,209 990 852 2,269 2,963 3,239

% chg - (18.1) (14.0) 166.3 30.6 9.3

(% of Net Sales) 13.0 11.4 10.1 19.7 19.2 18.7

Interest & other Charges 5.3 5.2 21.0 6.0 16.7 16.7

Other Income 524 149 122 144 180 199

(% of PBT) 27.9 13.8 14.6 6.2 5.8 5.8

Recurring PBT 1,728 1,134 953 2,408 3,126 3,421

% chg - (34.4) (15.9) 152.6 29.8 9.4

Extraordinary (Expense)/Inc. 150.6 (52.8) (114.8) (81.7) - -

PBT 1,878 1,081 838 2,326 3,126 3,421

Tax 490 378 299 705 875 924

(% of PBT) 26.1 35.0 35.6 30.3 28.0 27.0

PAT (reported) 1,238 756 655 1,703 2,251 2,497

ADJ. PAT 1,087 809 769 1,784 2,251 2,497

% chg - (25.6) (4.9) 132.0 26.1 11.0

(% of Net Sales) 11.7 9.3 9.1 15.5 14.6 14.4

Basic EPS (Rs) 107.5 55.9 53.2 117.7 155.6 172.6

Fully Diluted EPS (Rs) 107.5 55.9 53.2 117.7 155.6 172.6

% chg - (48.0) (4.9) 121.3 32.2 11.0


July 23, 2010 11

Balance Sheet Y/E March (Rs cr) FY07 FY08 FY09 FY10 FY11E FY12E

SOURCES OF FUNDS

Equity Share Capital 101.2 144.7 144.7 144.7 144.7 144.7

Preference Capital - - - - - -

Reserves & Surplus 5,433 1,443 1,725 2,784 4,273 5,875

Shareholders’ Funds 5,534 1,588 1,870 2,928 4,417 6,019

Total Loans 1,625.4 1,334.3 1,570.0 1,339 1,339 1,339

Deferred Tax Liability 74.2 11.0 4.2 1.7 1.7 1.7

Total Liabilities 7,234 2,933 3,444 4,269 5,758 7,360

APPLICATION OF FUNDS

Gross Block 3,179 2,984 3,350 3,379 3,668 3,843

Less: Acc. Depreciation 1,922 1,726 1,808 1,900 2,043 2,204

Net Block 1,256 1,258 1,542 1,480 1,626 1,639

Capital Work-in-Progress 26.9 34.7 22.1 41.5 36.7 38.4

Goodwill - - - - - -

Investments 6,448 1,857 1,809 4,022 4,894 6,624

Current Assets 3,819 1,650 2,325 3,001 4,034 4,370

Cash 83 56 137 101 586 642

Loans & Advances 2,896 969 1,491 2,180 2,311 2,421

Other 840 625 697 719 1,137 1,307

Current liabilities 4,333 1,877 2,438 4,275 4,833 5,311

Net Current Assets (514) (228) (112) (1,274) (799) (941)

Mis. Exp. not written off 18 11 183 - - -

Total Assets 7,234 2,933 3,444 4,269 5,758 7,360


July 23, 2010 12

Cash Flow Statement Y/E March (Rs cr) FY07 FY08 FY09 FY10 FY11E FY12E

Profit before tax 1,878 1,081 838 2,326 3,126 3,421

Depreciation 190 174 130 136 143 161

Change in Working Capital 7 (204) 145 800 (718) 103

Less: Other income 904 193 402 (180) (527) 165

Direct taxes paid 490 378 299 705 875 924

Cash Flow from Operations 682 480 413 2,737 2,203 2,596

(Inc.)/Dec. in Fixed Assets (287) 187 (353) (49) (284) (176)

(Inc.)/Dec. in Investments (591) - 49 (2,213) (873) (1,730)

(Inc.)/Dec. in loans and advances (94) (95) (141) (10) 638 11

Other income 524 149 122 144 180 199

Cash Flow from Investing (447) 240 (324) (2,127) (338) (1,696)

Issue of Equity - 44 - - - -

Inc./(Dec.) in loans 158 (291) 236 (231) - -

Dividend Paid (Incl. Tax) 462 474 339 372 675 762

Others (853) (973) (582) (786) (2,054) (1,606)

Cash Flow from Financing (233) (748) (8) (645) (1,379) (844)

Inc./(Dec.) in Cash 1 (27) 81 (35) 485 56

Opening Cash balances 82 83 56 137 101 586

Closing Cash balances 83 56 137 101 586 642


July 23, 2010 13

Key Ratios Y/E March FY07 FY08 FY09 FY10 FY11E FY12E

Valuation Ratio (x)

P/E (on FDEPS) 23.0 44.2 46.4 21.0 15.9 14.3

P/CEPS 17.5 38.4 45.5 19.4 14.9 13.4

P/BV 4.5 22.5 19.1 12.2 8.1 5.9

Dividend yield (%) 1.6 0.8 0.9 1.6 1.8 2.0

EV/Sales 2.9 3.6 3.9 2.7 1.9 1.6

EV/EBITDA 22.0 30.2 36.0 13.7 10.2 8.8

EV / Total Assets 4.3 12.0 10.3 7.7 5.5 4.0

Per Share Data (Rs)

EPS (Basic) 107.5 55.9 53.2 117.7 155.6 172.6

EPS (fully diluted) 107.5 55.9 53.2 117.7 155.6 172.6

Cash EPS 141.2 64.3 54.2 127.1 165.5 183.8

DPS 40.0 20.0 22.0 40.0 45.0 50.0

Book Value 547.0 109.7 129.2 202.4 305.3 416.0

DuPont Analysis

EBIT margin (%) 13.0 11.4 10.1 19.7 19.2 18.7

Tax retention ratio (x) 0.7 0.7 0.6 0.7 0.7 0.7

Asset turnover (x) 1.4 1.8 2.8 3.2 3.4 3.0

RoIC (Post-tax) 13.7 13.4 18.5 43.8 47.2 41.1

Cost of Debt (Post Tax) - - - - - -

Leverage (x) - - - - - -

Operating RoE (%) 13.7 13.4 18.5 43.8 47.2 41.1

Returns (%)

RoCE (Pre-tax) 17.8 19.5 26.7 58.8 59.1 49.4

Angel RoIC (Pre-tax) 16.9 34.4 25.8 54.5 57.3 48.2

RoE 21.1 22.7 44.5 74.4 61.3 47.9

Turnover ratios (x)

Asset Turnover (Gross Block) 3.1 2.9 2.8 3.5 4.5 4.8

Inventory / Sales (days) 11 14 15 12 12 12.4

Receivables (days) 16 17 14 10 14 14.0

Payables (days) 53 54 49 51 45 40.5

WC cycle (ex-cash) (days) (23) (18) (11) (25) (32) (30.3)

Solvency ratios (x)

Net debt to equity (0.9) (0.4) (0.2) (1.0) (0.9) (1.0)

Net debt to EBITDA (3.5) (0.5) (0.4) (1.2) (1.3) (1.7)

Interest Coverage (EBIT / Interest) 226.3 191.9 40.6 379.5 177.1 193.6


July 23, 2010 14

Disclosure of Interest Statement Bajaj Auto 1. Analyst ownership of the stock No 2. Angel and its Group companies ownership of the stock No 3. Angel and its Group companies' Directors ownership of the stock No 4. Broking relationship with company covered No Note: We have not considered any Exposure below Rs 1 lakh for Angel, its Group companies and Directors. Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%) Reduce (-5% to 15%) Sell (< -15%)

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