Bajaj will see a geater focus on the export market: Nishant Vaas, ICICI Securities

In a chat with ET Now, Nishant Vaas, Auto Analyst, ICICI Securities, shares his views on the Q1 earning numbers of Bajaj Auto. Excerpts:

ET Now: What would you make of the Rs 740 crore number in terms of the bottom line?

Nishant Vaas: There are a couple of things that need to be taking into account. There has been a change in the depreciation policy. On the other side, there is also a net increase in other expenses, due to the forex impact of around Rs 67 crore. So if you make an adjustment for those facts, possibly the numbers would be slightly closer to estimates.

ET Now: There has been a rise in other income as well and other income now is at Rs 219 crore for this quarter. So there has been a bump up in other income, which has of course flown through the bottom line, but despite that, the profitability is lower. What is your view?

Nishant Vaas: Yes, other income typically is an investment income-driven number. So a maturing of FMPs and so on possibly can happen. The major impact has happened from the FX impact on the other expense front, which typically gets reversed in the coming quarters. It is more of a mark to market on the hedges.

If you will adjust for that, the EBITDA margins would be closer to 19-19.5% and due to the new changes in the Companies Act, you would see a lot of companies having higher depreciations. So that has typically taken off some of the profits.

ET Now: The stock currently is at the lowest point. We have broken the Rs 2,000 mark as well and exports have been 44% of net sales for this quarter at Rs 2,251 crore. Are you satisfied with the way this number has shaped up and what is the guidance ahead on the export front?

Nishant Vaas: Exports would continue to do well, because the domestic market has a higher pressure in terms of competitive intensity and it will keep on rising post the break up from Honda and Hero.

I think Bajaj will see a geater focus on the export market. That is where they would see higher growth possibilities emerging rather than the domestic market. The exports numbers right now are decent and they should ramp up as we go ahead in the year.

ET Now: Are you revising your targets on Bajaj Auto after the downtick that we have seen and the fierce competition that we keep talking about?

Nishant Vaas: No, we have a high target on Bajaj, which we will continue to maintain. So we have a target of around Rs 2,300 for the stock.