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BUY Bajaj Auto with a target of 2200 in 1 year point of time.

Bajaj Auto plans to launch six new versions of the Discover starting July in a bid to boost market share, and expects to maintain EBITDA margins at 20 percent going forward.
Rajiv Bajaj, MD, Bajaj auto is optimistic of maintaining double-digit growth in exports. Exports constitute 33 percent of total revenues for the company.
Bajaj auto will continue to gain market share at the retail level and out of the six Discover launches, only two will be placed in the high-end market. Bajaj management is expecting a 10-12 percent growth for 3-wheelers going forward and hope the auto sector's performance improves.
Q4 EARNINGS:

Total revenues were about Rs 5,000 crore. Profit after tax (PAT) was at Rs 766 crore, flat year-on-year. Even for the year as a whole, the earnings were pretty flat.

The EBITDA margins were at 19.2 percent compared to 20.6 percent in Q4 of the previous year, down by almost 150 bps.

FY’14 GUIDANCE:

Bajaj expects April to be similar to last year and don't expect any change going forward till july. Bajaj expect EBITDA margins, around 20 percent.

Bajaj have six new Discovers for launch starting in July. Bajaj are going to replace entire portfolio of three-wheelers with a completely new range.

POSITIVES:

* Commodities are also very stable. * Depreciating currency increased the margins by 8-9%. * The contribution of exports to total revenues has gone up.

CHALLENGES: * Uncertainty remains to be the only problem in both the domestic and export markets. * Increased competition by Honda. * Market share decreased by 24.5-percent compared to 25.5 percent the year before.

FINANCIALS:

With CAGR of net profits at 33% and ROCE at 68% Bajaj auto has very strong fundamentals. PE is on slightly higher at 17 times FY13 earnings compared to its historic average of 15. Though in tough economic environment growth has flattened out for entire auto sector which is expected to show pickup soon. Bajaj is hopeful to see revival from july backed by its new launches.

OUTLOOK
We have a BUY rating on the stock with target of 2200 in 1 year point of time.

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