Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Bajaj Auto: Fails to enthuse the bourses - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Oct 5, 2000

    Bajaj Auto: Fails to enthuse the bourses

    Bajaj Auto's (BAL) performance in the stock markets over the past few months has been lacklustre. In the past few trading sessions too the scrip has been faced with selling pressure. The company's offer to buyback 18 m shares at a price of Rs 400 per share has failed to bring back life into the stock.

    On the motorcycle front the company is doing well. For the first six months of the current year the company sold 2,02,315 motorcycles, a growth of 104% YoY. The company has become an aggressive player in this segment with new product launches. As a result its has captured a market share of 21.6%, and is now the second largest player in this segment, overtaking TVS Suzuki.

    Share price performance in absolute and relative terms
      6th October'2000 2 weeks 1 mth 3 mths
    Bajaj Auto Ltd (Rs) 317 357 360 357
    Absolute (%)   -11.2% -11.9% -11.2%
    Relative to BSE Sensex (%)   -14.0% -3.0% 4.0%
    BSE Sensex 4,173 4,032 4,606 4,886
    Absolute (%)   3.5% -9.4% -14.6%

    However on the scooter front the company is still facing tough times as this industry is not showing any signs of a recovery. The shift in consumer preferences is clearly towards motorcycles and mopeds. As scooters form a large chunk of the company's revenues, this continues to act as a drag on its earnings.

    Besides the fact, that scooters the company's high margin business is not doing well the other factors like its surplus funds and its stock market related activities too have resulted in a de-rating in Bajaj Auto's stock. Its buoyant motorcycle volumes have failed to make up for all these.

    As margins in the motorcycle and mopeds segment are lower than traditional scooters and in future a large chunk of the sales mix will be contributed by these two segments, this has resulted in a pressure on the company's margins in the current financial year.

    Bajaj Auto: Valuations deserved?
    Two wheeler cos. EPS (Rs)
    P/E (x)
    EPS growth (%)
    Gross margin (%)
    ROE (%)
    (ROCE) %
    Bajaj Auto 57.6 5.5 6.0% 12.5% 19.2% 16.7%
    Hero Honda 81.5 10.5 30.0% 13.4% 43.3% 38.7%
    TVS Suzuki 53.8 3.0 17.0% 10.4% 27.4% 19.1%

    As BAL is still sitting on a large surplus of funds, the markets are not looking favourably towards this. Of its total balance sheet, cash, investments and loans and advances at Rs 38 billion account for 70%. The company has decided to use Rs 7.2 bn of this for buy back of shares. However it should still also consider the rest of it by increasing dividend payouts, and increasing its spends on research and development.

    On the current price of Rs 317 , BAL is trading at 6.1x on its FY2000 EPS of Rs 51.4.



    Equitymaster requests your view! Post a comment on "Bajaj Auto: Fails to enthuse the bourses". Click here!


    More Views on News

    Tata Motors Ltd: Another Disappointing Quarter, Management fails to Perform! (Quarterly Results Update - Detailed)

    Aug 14, 2017

    Tata Motors Ltd disappoints again for both India and JLR business. Management commentary indicates a slow year ahead.

    Maruti Suzuki Ltd: Bumpy First Quarter. GST dents Margins! (Quarterly Results Update - Detailed)

    Aug 2, 2017

    GST realted cost impacts Margins, Management expects good year ahead.

    Hero Motocorp Ltd: Riding on the Scooters Growth, Maintains Margins! (Quarterly Results Update - Detailed)

    Aug 1, 2017

    Good Recovery in the Scooters market, expects pick up in exports too.

    Bajaj Auto Limited: Recovery in Exports but Domestic Disappoints! (Quarterly Results Update - Detailed)

    Aug 1, 2017

    New Export Markets picking up, Management expects good recovery in domestic Three wheeler market.

    Bajaj Auto Limited: Finishes the Year with Headwinds. Poised for a Recovery Ahead? (Quarterly Results Update - Detailed)

    Jul 6, 2017

    Ends the year on a Flat note. Expects good recovery in the exports market.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)


    • Track your investment in BAJAJ HOLDINGS & INVSTMENT with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks