For 4QFY2009, Bajaj Auto (BAL) clocked net sales of Rs1,883 crore (Rs2,075 crore), down 9.2% y-o-y, which was ahead of our expectation of Rs1,766 crore.
Total volumes for the quarter declined 20.3% y-o-y while average realizations per vehicle improved substantially by 13.1% primarily due to the change in sales mix and better performance by the 125cc-plus segment.
Growth in the 125cc-plus segment was however, offset by poor performance by the 100cc Segment.
BAL’s bottomline for the quarter at Rs130.2 crore (Rs120.8 crore) also came in better than our estimate. Lower depreciation and tax during the quarter aided net profit growth.
We have been maintaining a positive stance on the BAL stock considering the substantial valuation gap with Hero Honda.
After a recent run up in the stock, the valuation gap has now reduced to reasonable levels of around 20%, which we believe is justified to a certain extent owing to BAL’s less consistent track record and it losing market share in the domestic markets.
At the CMP, the stock is trading at fair valuations of 13.7x FY2010E and 12.8x FY2011E EPS.
Hence, we change our rating on the stock from Accumulate to NEUTRAL.
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