Bajaj Auto; Positive surprises to continue, Maintain ACCUMULATE; Target: Rs 1,630

Bajaj Auto Limited

Reco: ACCUMULATE

CMP: Rs1,446

Target Price: Rs1,630

Positive surprises to continue, Maintain ACCUMULATE

·      Demand outlook remains strong. Current scenario also indicates a good FY12. Exports can grow by 20% for FY12. A large part of FY12E exports also  hedged at Rs 47 to USD

·      Cost pressures are increasing due to higher conversion cost. Steel contracts are quarterly (QoQ prices are down in 2Q, to rise in 3Q). Margins for FY11 to be around 20%

·      We maintain our bullish stance on the industry volume for FY12. The recent est of khariff crop (+10% YoY) give further impetus to our view. Expect upgrades in volumes for FY12

·      Upgrading FY12 EPS estimates by 10% to Rs 105 for FY12 due to volume upgrades (+8%). Maintain ACCUMULATE rating with a revised TP of Rs 1630 (+13%)

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