>BAJAJ AUTO (MOTILAL OSWAL)

■ Bajaj Auto 4QFY09 results are above estimates, but for forex loss of Rs218m on hedging instruments. EBITDA margins were at 15.2% and adjusted PAT of Rs1.87b.

■ Volumes declined 20% in 4QFY09 (two-wheeler sales declined 22% YoY where as 3Ws de-grew 7%). However, realizations in 4Q improved by 14% YoY (flat QoQ) due to improvement in product mix.

■ Revenue at Rs18.8b de-grew by 9%, due to 20% decline in volumes. However, improvement in business mix and RM cost savings led to 70bp QoQ (~260bp YoY) improvement in EBITDA margins to 15.2%, translating into EBITDA of Rs2.86b. During the quarter, Bajaj accounted for forex loss of Rs218m on hedging instruments. Adjusted PAT at Rs1.87b was higher by 22% YoY.

■ Higher INR/USD realization in FY10 would drive export realizations and EBITDA: Bajaj would benefit from higher INR/USD for its exports. For FY10, it has entered into collar option for US$535m (70-75% of expected export revenues). The collar option provides bottom side protection at Rs47 and caps upside at Rs55. At floor rate of Rs47, its export realizations would be higher by 14% over FY09 average rate of Rs41.2.

■ Upgrading estimates: We are upgrading our earnings estimates for FY10 by 13.9% to Rs72.4 and FY11 by 15.5% to Rs78, to factor in for a) Higher export realizations and b) RM cost savings of 370bp in FY10 over FY09. The stock trades at 12.9x FY10E EPS and 7.6x FY10E EV/EBITDA. Maintain Buy.

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