Bajaj Auto numbers above estimates: Nishant Vaas, ICICI Securities

In a chat with ET Now, Nishant Vaas, auto analyst, ICICI Securities, talks about the Bajaj Auto numbers. Excerpts:

ET Now: Do you agree that Bajaj Auto numbers are above estimates and what really led to that?

Nishant Vaas: Yes, the numbers are significantly above estimates. Actually the major kick up for the numbers has been the higher rupee realisations for the quarter. The rupee realisations on an average basis have been at 60.9 while the street was roughly working with a 58 to 59, progressively going on increasing ahead.

Therefore that has been the major kicker that has driven the export revenue and overall margins up. Obviously the cost controls are very significantly stronger at Bajaj vis-à-vis other players. So the decline in volumes has not hit them in terms of EBITDA performance that much.

The EBITDA margin performance remains very strong. The key thing to watch out for is how they have hedged for the FY15 revenues because the rupee has slid back to the 61 levels from the higher levels that we saw earlier. That will be the key thing that will be watched out for in terms of rupee realisations going ahead.

However, the volume growth in the domestic market remains soft and exports are the only things that we will be waiting out for.

ET Now: Do you see the margins sustaining at current levels?

Nishant Vaas: To a certain extent, yes, till the rupee behaves favourably for them. However, the fact is FY15 and rupee levels would be very tough to gather right now. So as I earlier said, it is better for them if they lock in their rupee revenues right now that will still maintain margins above 20% comfortably.

ET Now: Come Thursday morning what are you expecting from the stock and are you also going to revise the price target for that stock upwards?

Nishant Vaas: We have had a buy rating on the stock with a target price of Rs 2220. However, obviously the price is close to that. So yes, there might be some upward revision in the price and we expect whenever the market reopens, this stock should see a positive uptick.