key data multiple tailwinds to counter headwinds

Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited

KEY DATA

Rating BUY Sector relative Outperformer Price (INR) 3,836 12 month price target (INR) 4,428 Market cap (INR bn/USD bn) 1,110/15.0 Free float/Foreign ownership (%) 46.3/13.7

What’s Changed Target Price

Rating/Risk Rating

QUICK TAKE

Multiple tailwinds to counter headwinds

While Q4FY21 results came in line, we upgrade Bajaj Auto (BJAUT) to ‘BUY’ to factor in its strong execution in the past three years, potential for new product/platform launches in 12 months, currency tailwind (~45% exports), recovery in three wheelers (3W), strong export outlook and revised dividend policy providing almost 5% yield.

Hence, we raise our target core PE to 22x (from 20x) with a revised TP of INR4,428 (earlier INR4,066) as we roll over to Sept 2022E earnings. We believe BJAUT has adequate levers to counter commodity pressure and softening demand compared to peers. As discussed in Commodities spike, a strong product cycle is imperative for pricing power and margin cushion.

FINANCIALS (INR mn)

Year to March FY21A FY22E FY23E FY24E

Revenue 2,77,411 3,43,405 3,83,897 4,21,104

EBITDA 49,285 60,021 68,840 79,346

Adjusted profit 45,730 53,613 61,059 69,767

Diluted EPS (INR) 158.0 185.3 211.0 241.1

EPS growth (%) (10.3) 17.2 13.9 14.3

RoAE (%) 20.3 21.0 23.4 26.1

P/E (x) 24.3 20.7 18.2 15.9

EV/EBITDA (x) 20.7 17.0 14.8 12.8

Dividend yield (%) 3.6 4.3 5.0 5.7

PRICE PERFORMANCE

In-line quarter; focus on premiumisation continues

Net revenue at INR86bn was 3% above estimate driven by better mix in domestic

and exports. It should be noted that for exports USD/INR at 72.9 was lower by 1%

QoQ. This was more than compensated by favourable mix – higher share of Pulsar

and Dominar in exports and higher share of 125cc+ motorcycles in domestic. EBITDA

at INR15.2bn was also 3% above estimate. Commodity cost pressure was ~300bps

QoQ and similar trajectory is expected in Q1FY22. To counter this, price hike effected

in Q4FY21 was ~2.0% and another 1.5% in Q1FY22. We expect the balance to be

mitigated by product mix, value engineering and currency tailwind.

Strong execution will leverage multiple tailwinds

Premiumisation continues to be key strategy. This is reflected in market share gain

in the 125cc segment with Pulsar 125cc (19% in Q4FY21 versus 7% in FY20) and rising

share of 110cc and disc brake & electric start variants in the entry segment. We

expect BJAUT to widen its product bouquet with offerings in 125cc & 250cc segments

and continue to leverage the KTM, Triumph & Husqvarna stable. Management also

indicated launch of new platform in the next six months. Improving outlook for 3Ws

and exports along with currency tailwinds provide multiple advantages to counter

commodity inflation and softening domestic 2W demand.

Explore:

Outlook and valuation: Bright prospects; upgrade to ‘BUY’

We like BJAUT’s strong execution, which instils confidence that it can succeed in

expanding offerings. The new dividend policy will improve return ratios. Upgrade to

‘BUY/SO’ from ‘HOLD/SU’, valuing at 22x Sep-22E core EPS of INR159 plus cash/ share

of INR770 and KTM at INR165. At CMP stock trades at FY22E/23E PER of 20.7/18.2x.

Financials Year to March Q3FY21 Q3FY20 % Change Q2FY21 % Change

Net Revenue 89,099 76,397 16.6 71,559 24.5

EBITDA 17,296 13,672 26.5 12,662 36.6

Adjusted Profit 15,563 12,616 23.4 11,382 36.7

Diluted EPS (INR) 0.0 0.0 0.0

30,000

34,600

39,200

43,800

48,400

53,000

2,400

2,770

3,140

3,510

3,880

4,250

Apr-20 Jul-20 Oct-20 Jan-21 Apr-21

BJAUT IN Equity Sensex

India Equity Research Automobiles April 29, 2021

BAJAJ AUTO RESULT UPDATE

Chirag Shah +91 (22) 6623 3367 [email protected]

Corporate access

Financial model Podcast

Video

https://www.edelweissresearch.com/Reports/Get/40E3FF36-8F4E-4CC0-A59A-66785662F640

https://www.edelweissresearch.com/Research/Company?Id=2197

https://www.edelweissresearch.com/Podcasts?Search=bajaj+auto&FromDate=&ToDate=

https://www.edelweissresearch.com/CorporateAccess

https://www.edelweissresearch.com/Videos

BAJAJ AUTO

Edelweiss Securities Limited

2 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset

Financial Statements

Income Statement (INR mn) Year to March FY21A FY22E FY23E FY24E

Total operating income 2,77,411 3,43,405 3,83,897 4,21,104

Gross profit 81,314 98,012 1,10,471 1,24,550

Employee costs 12,860 14,018 15,139 16,351

Other expenses 19,170 23,973 26,491 28,853

EBITDA 49,285 60,021 68,840 79,346

Depreciation 2,593 2,806 3,106 3,406

Less: Interest expense 80 80 80 80

Add: Other income 12,765 12,775 14,035 15,295

Profit before tax 59,377 69,910 79,689 91,156

Prov for tax 13,647 16,297 18,630 21,388

Less: Other adj 0 0 0 0

Reported profit 45,730 53,613 61,059 69,767

Less: Excp.item (net) 0 0 0 0

Adjusted profit 45,730 53,613 61,059 69,767

Diluted shares o/s 289 289 289 289

Adjusted diluted EPS 158.0 185.3 211.0 241.1

DPS (INR) 140.0 166.7 189.9 217.0

Tax rate (%) 23.0 23.3 23.4 23.5

Important Ratios (%) Year to March FY21A FY22E FY23E FY24E

Gross profit margin (%) 29.3 28.5 28.8 29.6

Staff cost % sales 4.6 4.1 3.9 3.9

Other expenses % sales 6.9 7.0 6.9 6.9

EBITDA margin (%) 17.8 17.5 17.9 18.8

Net profit margin (%) 16.5 15.6 15.9 16.6

Revenue growth (% YoY) (6.8) 23.6 11.8 9.7

EBITDA growth (% YoY) (3.3) 21.8 14.7 15.3

Adj. profit growth (%) (10.3) 17.2 13.9 14.3

Assumptions (%) Year to March FY21A FY22E FY23E FY24E

GDP (YoY %) (6.0) 7.0 6.0 0

Repo rate (%) 3.5 3.5 4.0 0

USD/INR (average) 75.0 73.0 72.0 0

Total volume (nos) 39,72,914.

0

47,79,030.

1

52,31,922.

7

0

% Growth (14.0) 20.3 9.5 0

Dom MC Vols (% YoY) (16.0) 18.0 18.0 0

Dom 3W Vols (% YoY) (20.0) 20.0 20.0 0

Valuation Metrics Year to March FY21A FY22E FY23E FY24E

Diluted P/E (x) 24.3 20.7 18.2 15.9

Price/BV (x) 4.4 4.3 4.2 4.1

EV/EBITDA (x) 20.7 17.0 14.8 12.8

Dividend yield (%) 3.6 4.3 5.0 5.7

Source: Company and Edelweiss estimates

Balance Sheet (INR mn) Year to March FY21A FY22E FY23E FY24E

Share capital 2,894 2,894 2,894 2,894

Reserves 2,49,129 2,54,490 2,60,596 2,67,573

Shareholders funds 2,52,023 2,57,384 2,63,490 2,70,467

Minority interest 0 0 0 0

Borrowings 1,606 1,606 1,606 1,606

Trade payables 31,873 39,594 44,019 47,750

Other liabs & prov 29,800 30,165 30,390 30,596

Total liabilities 3,15,302 3,28,749 3,39,505 3,50,419

Net block 16,126 19,320 22,214 24,808

Intangible assets 0 0 0 0

Capital WIP 160 160 160 160

Total fixed assets 16,286 19,480 22,374 24,968

Non current inv 36,519 36,519 36,519 36,519

Cash/cash equivalent 1,95,587 1,95,796 1,97,472 2,00,105

Sundry debtors 27,169 33,592 37,549 41,186

Loans & advances 372 460 514 564

Other assets 39,369 42,901 45,077 47,077

Total assets 3,15,302 3,28,749 3,39,505 3,50,419

Free Cash Flow (INR mn) Year to March FY21A FY22E FY23E FY24E

Reported profit 45,730 53,613 61,059 69,767

Add: Depreciation 2,593 2,806 3,106 3,406

Interest (net of tax) 62 61 61 61

Others (6,872) (12,757) (14,017) (15,276)

Less: Changes in WC (10,374) (1,959) (1,536) (1,750)

Operating cash flow 31,139 41,765 48,674 56,208

Less: Capex (1,826) (6,000) (6,000) (6,000)

Free cash flow 29,313 35,765 42,674 50,208

Key Ratios Year to March FY21A FY22E FY23E FY24E

RoE (%) 20.3 21.0 23.4 26.1

RoCE (%) 20.6 22.3 25.1 28.3

Inventory days 24 25 26 27

Receivable days 29 32 34 34

Payable days 59 53 56 56

Working cap (% sales) 3.9 3.7 3.7 3.8

Gross debt/equity (x) 0 0 0 0

Net debt/equity (x) (0.8) (0.8) (0.7) (0.7)

Interest coverage (x) 583.7 715.2 821.7 949.3

Valuation Drivers Year to March FY21A FY22E FY23E FY24E

EPS growth (%) (10.3) 17.2 13.9 14.3

RoE (%) 20.3 21.0 23.4 26.1

EBITDA growth (%) (3.3) 21.8 14.7 15.3

Payout ratio (%) 88.6 90.0 90.0 90.0


BAJAJ AUTO

Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 3

Q4FY21 conference call: Key highlights

Key highlights

Focus on premiumisation continues to remain key the key pillar of strategy for

India as well as exports.

125cc+ motorcycle contribution has increased from 46% in FY20 to 60% in

4QFY21, while share of pulsar 125cc is up from 7% in FY20 to 19% in Q4FY21.

Domestic demand outlook remains hazy. Interesting to note that bottom of the

pyramid demand is more affected, while demand for upper end of products is

intact.

Exports – expects FY22 to be one of the best years.

Domestic 3W had started to return to normalcy before wave 2 emerged. In

March 2021, road traffic was 85% of normal.

Expects introduction of new platform in next 6 months. Also there exists white

space in the 125cc segment as Pulsar 125cc cannot capture all the opportunities.

EV 2W – current focus is to develop best capabilities so that it can enter the

segment when the time is right. Will sell EV products to the extent it is necessary

to develop capabilities. Is working with KTM on high-end motorcycles as well as

with Yolo for low powered scooters.

Strategy was to capture demand recovery especially exports.

Demand Outlook

Domestic motorcycle can reach FY20 levels in FY22. Last 4 years industry has seen

some or other disruption – on costs as well as demand. Industry needs some non

disruptive time to come back. Underlying drivers have been in place.

Clear focus on premiumisation with the segment as well shift demand from 100-

110cc to 125cc. Similarly, there is clear focus on entering 250cc segment.

Encouraged by the strong response to Pulsar 125cc motorcycle.

Domestic 3W - underlying drivers were normalising just before wave 2 emerged.

Exports – expects to have one of the best years.

Rural growth driver in end of June and July in FY21 – otherwise it was across

country, except for metros. Towards the end, rural agrarian demand was not

doing well, but rural town was doing well. Better monsoon expected – hence

demand trend should be similar to last year.

Domestic motorcycle mix

Share of 125cc+ has risen from 46% in FY20 to 60% in Q4FY21.

Pulsar 125cc market share improved from 7% in FY20 to 19% in Q4FY21.

125cc segment expanded by 4%.

Launched 3 upgrade variants – Platina 110 Ex, electric start options in entry and

Pulsar 125NS .

BAJAJ AUTO



Domestic 3W

It has 3 segments – small passenger – large passenger (used in smaller town) and

cargo segment.

Bajaj has 85 market share (MS) in small passenger segment. In large passenger

MS is 48% in Q4, ahead by 12% against its competitor. In cargo gained 6% MS

gain – now 34%.

Export business

Volumes 200k per month in Q4 with Jan21 saw highest ever sales.

As a result breached 2mn unit sales in FY21.

In exports – Premium and Dominar have moved up from 13% to 16% in FY21.

80% of revenue from market where the company is No 1 or 2. 77% of revenue

countries where Bajaj is no 1. This has been a key monitoring factor since 5 years

as it indicate pricing power and ability to manage headwinds.

Margin trajectory ex of RM here on

It can only go up.

CV will recover from Q4.

Depreciating INR.

RODEP will come and bring in some benefits.

Commodity cost pressure

Between Q4FY21 and Q1FY22 cost increase is 7%.

Price hike in Q4 was 2% and another 1.5% in Q1FY21.

Commodity pressure should peak out soon as it cannot keep on rising.

RODEP

It will be launched, as per understanding via industry body.

Whether it will offset MEIS completely – not sure

KTM

Exports been doing well.

Not able to service full demand due to semi-conductor shortage. Falling short by

15%.

KTM profitability

o Steady state profit.

o Q1 it was loss, for full year it is same as FY20.

Chetak and EV strategy

Aims to touch 1,000 unit of deliveries.

Capacity is restricted by availability of imports.

Pricing – started with 100k and now up almost 40%.


BAJAJ AUTO


The issue is not charging infra. There are adequate entrepreneurs who will set

up the business

Fundamental thing is when will battery cost fall?

BJAUT is aiming to have the capability ready. Cannot wait till battery costs come

down. Lot depends on battery cost which depends on supply coming on stream.

Issue is demand-supply mismatch for batteries and its RM. Companies in 4W

space globally in place large contracts for future.

Battery cell tech companies do not want to be caught on wrong side due to

evolving chemistry and tech.

Demand has to match supply.

It may take 3 to 5 years for inflection point for domestic 2W EV story to reach

inflection point as per few experts – not a BJAUT view.

o 3W

o Electric 3W – business case like to like not that strong. If there is regulatory

support than matter is different

o Primary objective is to be at the forefront on development side, but not

necessarily to sell it all out.

o Wants to be most capable 3W manufacturing; will do business that is need

to de develop this skill set.

o Current E3W market is in lead acid battery. It is a substandard solution. It

mushroomed due to artificial restriction on ICE 3W (permits) and need for

mobility exploded. The product is not necessarily is good. Most of vehicles

are imports from China.

o In China entire lead acid battery has gone into doldrums.

Kodak moment for ICE players

o Unlikely to happen as all are educated to understand the risk of myopic view.

o Tesla has also educated

o Start up do not have a biz, hence they have to make noise and take bet

o Old-line guys have a business model and will work on developing capabilities

till inflection point is reached.

Others

Exports – Revenue at INR39.9bn

Spares – INR10.9bn

USD INR: 72.9 in Q4 vs 73.6 in Q3

o Spare growth – there was back log – hence there is a catch up. For full year

there is a marginal decline.

BAJAJ AUTO



EPS trajectory

EPS trajectory FY18 FY19 FY20 FY21E FY22E FY23E

Core EPS 104.4 110.0 125.3 121.5 151.4 172.5

YoY (%) 6.0 5.3 14.0 (3.1) 24.7 13.9

Adjusted diluted EPS 142.0 153.3 176.2 156.4 189.0 213.7

YoY (%) 7.4 8.0 14.9 (11.3) 20.8 13.1

Source: Company, Edelweiss Research

Volume assumptions

Particulars FY20 FY21 FY22E FY23E

Domestic 22,91,041 14,67,244 18,04,207 19,79,700

Two-wheeler 19,25,372 13,57,952 15,85,623 17,28,329

Three-wheeler 3,65,669 1,09,292 2,18,584 2,51,372

Exports 21,71,105 20,54,247 24,24,087 26,51,920

Two-wheeler 18,69,220 17,96,518 21,01,926 22,91,099

Three-wheeler 3,01,885 2,57,729 3,22,161 3,60,821

Total 44,62,146 35,21,491 42,28,294 46,31,620

% YoY

Domestic (22.1) (36.0) 23.0 9.7

Two-wheeler (24.2) (29.5) 16.8 9.0

Three-wheeler (8.5) (70.1) 100.0 15.0

Exports 4.4 (5.4) 18.0 9.4

Two-wheeler 10.2 (3.9) 17.0 9.0

Three-wheeler (21.2) (14.6) 25.0 12.0

Total (11.1) (21.1) 20.1 9.5

Product-mix (% total sales)

Domestic 51.3 41.7 42.7 42.7

Two-wheeler 43.1 38.6 37.5 37.3

Three-wheeler 8.2 3.1 5.2 5.4

Exports 48.7 58.3 57.3 57.3

Two-wheeler 41.9 51.0 49.7 49.5

Three-wheeler 6.8 7.3 7.6 7.8

Total 100.0 100.0 100.0 100.0

Forex

USD/INR forex cover rate 70.7 75.0 73.0 73.0


Valuation snapshot

Particulars Sep2022E

Core EPS (INR) 159

Earnings multiple (x) 22.0

Fair value (INR) 3,493

Cash per share (INR) 770

Value of KTM per share (INR) 165

Total fair value per share (INR) 4,428

Source: Edelweiss Research


BAJAJ AUTO


Financial snapshot

Year to March Q4FY21 Q4FY20 % YoY change Q3FY21 % QoQ change

Total units sold (nos) 11,66,804 9,91,961 17.6 13,07,810 (10.8)

Net Realisation 60,959 59,185 3.0 59,184 3.0

Net revenues 85,961 68,159 26.1 89,099 (3.5)

Raw material 61,767 46,653 32.4 63,082 (2.1)

Staff costs 3,070 3,421 (10.3) 3,172 (3.2)

Other expenses 5,884 5,557 5.9 5,548 6.0

Total expenditure 70,720 55,631 27.1 71,803 (1.5)

EBITDA 15,241 12,528 21.7 17,296 (11.9)

Depreciation 662 633 4.6 650 1.8

EBIT 14,579 11,895 22.6 16,646 (12.4)

Less: Interest Expense 20 9 10

Add: Other income 2,836 5,327 (46.8) 3,692 (23.2)

Add: Exceptional items 0 0 NA 0

Profit before tax 17,395 17,212 1.1 20,328 (14.4)

Less: Provision for Tax 4,074 4,109 (0.9) 4,765 (14.5)

Reported Profit 13,321 13,103 1.7 15,563 (14.4)

Adjusted Profit 13,321 13,103 1.7 15,563 (14.4)

No. of Diluted shares outstanding 289 289 0.0 289 -

Adjusted Diluted EPS 46.0 45.3 1.7 53.8 (14.4)

As a % revenues

Gross margins 28.1 31.6 29.2

Raw material 71.9 68.4 70.8

Staff costs 3.6 5.0 3.6

Other expenses 6.8 8.2 6.2

EBIDTA 17.7 18.4 19.4

Adjusted net profit 15.5 19.2 17.5

Tax rate (% PBT) 23.4 23.9 23.4


BAJAJ AUTO



Company Description

Bajaj Auto (BJAUT) is the second largest motorcycle manufacturer in India. It offers

products in all motorcycle segments—Platina (entry), Discover (executive) and

Pulsar (premium). It is also the largest three-wheeler manufacturer in India. Post the

demerger in May 2008, BAL has been solely focused on the automobile business. In

the past few years, the company has shown strong growth in exports that now forms

nearly 40% of its total volumes.

Investment Theme

BJAUT is a diversified play with domestic motorcycle, three wheeler and export

portfolio. Company's ability to sustain profitability despite weak

volumes/export/commodity headwinds remains commendable. Going ahead, we

expect it to be the key beneficiary of new launches (initial success in the

Economy/Premium segment visible), rising premiumisation in motorcycles and huge

potential in export markets.

Key Risks

Weak export growth

About 40% of BJAUT's volumes are exported. Slowdown in any of its key regions -

Africa, LatAM etc can impact export growth and weigh on profitability


BAJAJ AUTO


Additional Data

Management

CEO Mr. Rajiv Bajaj

CFO Mr. Soumen Roy

COO Mr. Rakesh Sharma

Chairman Mr. Rahul Bajaj

Auditor SRBC & Co

Holdings – Top 10* % Holding % Holding

LIC 4.60 Lazard Ltd 0.55

SBI Funds 1.35 UTI Asset Manag 0.44

Norges Bank 1.09 Tata AM 0.36

Vanguard Group 1.09 State of Califo 0.33

BlackRock 1.03 Caisse de Depot 0.33

*Latest public data

Recent Company Research Date Title Price Reco

10-Feb-21 Stable ride; Company Update 4,237 Hold

21-Jan-21 Tight leash on cost drives profit beat; Result Update

3,703 Hold

26-Nov-20 Festive sales undershoot expectations ; Company Update

3,051 Hold

Recent Sector Research Date Name of Co./Sector Title

27-Apr-21 Maruti Suzuki Disappointment continues; Result Update

16-Apr-21 Automobiles Hero Electric: Igniting the right spark ; Sector Update

16-Apr-21 Tata Motors Q4FY21 preview estimates revised; Edel Flash

Rating Interpretation

Source: Bloomberg, Edelweiss research

Daily Volume

Source: Bloomberg

Rating Distribution: Edelweiss Research Coverage

Buy Hold Reduce Total

Rating Distribution* 166 59 17 242

>50bn >10bn and <50bn <10bn Total

Market Cap (INR) 198 51 4 253

* stocks under review

Rating Rationale

Rating Expected absolute returns over 12 months

Buy: >15%

Hold: >15% and <-5%

Reduce: <-5%

TP3,651

TP3,718

TP3,399

TP2,812

TP2,962

1925

2285

2645

3005

3365

3725

Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20

(IN

R)

BJAUT IN Equity Buy Hold Reduce0

2

4

6

8

10

Apr-18 Oct-18 Apr-19 Oct-19 Apr-20 Oct-20

(Mn

)

BAJAJ AUTO



DISCLAIMER Edelweiss Securities Limited (“ESL” or “Research Entity”) is regulated by the Securities and Exchange Board of India (“SEBI”) and is licensed to carry on the business of broking, Investment Adviser, Research Analyst and related activities.

This Report has been prepared by Edelweiss Securities Limited in the capacity of a Research Analyst having SEBI Registration No.INH200000121 and distributed as per SEBI (Research Analysts) Regulations 2014. This report does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. Securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 includes Financial Instruments and Currency Derivatives. The information contained herein is from publicly available data or other sources believed to be reliable. This report is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this report should make such investigation as it deems necessary to arrive at an independent evaluation of an investment in Securities referred to in this document (including the merits and risks involved), and should consult his own advisors to determine the merits and risks of such investment. The investment discussed or views expressed may not be suitable for all investors.

This information is strictly confidential and is being furnished to you solely for your information. This information should not be reproduced or redistributed or passed on directly or indirectly in any form to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ESL and associates / group companies to any registration or licensing requirements within such jurisdiction. The distribution of this report in certain jurisdictions may be restricted by law, and persons in whose possession this report comes, should observe, any such restrictions. The information given in this report is as of the date of this report and there can be no assurance that future results or events will be consistent with this information. This information is subject to change without any prior notice. ESL reserves the right to make modifications and alterations to this statement as may be required from time to time. ESL or any of its associates / group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. ESL is committed to providing independent and transparent recommendation to its clients. Neither ESL nor any of its associates, group companies, directors, employees, agents or representatives shall be liable for any damages whether direct, indirect, special or consequential including loss of revenue or lost profits that may arise from or in connection with the use of the information. Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein. Past performance is not necessarily a guide to future performance .The disclosures of interest statements incorporated in this report are provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. The information provided in these reports remains, unless otherwise stated, the copyright of ESL. All layout, design, original artwork, concepts and other Intellectual Properties, remains the property and copyright of ESL and may not be used in any form or for any purpose whatsoever by any party without the express written permission of the copyright holders.

ESL shall not be liable for any delay or any other interruption which may occur in presenting the data due to any reason including network (Internet) reasons or snags in the system, break down of the system or any other equipment, server breakdown, maintenance shutdown, breakdown of communication services or inability of the ESL to present the data. In no event shall ESL be liable for any damages, including without limitation direct or indirect, special, incidental, or consequential damages, losses or expenses arising in connection with the data presented by the ESL through this report.

We offer our research services to clients as well as our prospects. Though this report is disseminated to all the customers simultaneously, not all customers may receive this report at the same time. We will not treat recipients as customers by virtue of their receiving this report.

ESL and its associates, officer, directors, and employees, research analyst (including relatives) worldwide may: (a) from time to time, have long or short positions in, and buy or sell the

Securities, mentioned herein or (b) be engaged in any other transaction involving such Securities and earn brokerage or other compensation or act as a market maker in the financial

instruments of the subject company/company(ies) discussed herein or act as advisor or lender/borrower to such company(ies) or have other potential/material conf lict of interest with

respect to any recommendation and related information and opinions at the time of publication of research report or at the time of public appearance. ESL may have proprietary long/short

position in the above mentioned scrip(s) and therefore should be considered as interested. The views provided herein are general in nature and do not consider risk appetite or investment

objective of any particular investor; readers are requested to take independent professional advice before investing. This should not be construed as invitation or solicitation to do business

with ESL.

ESL or its associates may have received compensation from the subject company in the past 12 months. ESL or its associates may have managed or co-managed public offering of securities for the subject company in the past 12 months. ESL or its associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months. ESL or its associates may have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months. ESL or its associates have not received any compensation or other benefits from the Subject Company or third party in connection with the research report. Research analyst or his/her relative or ESL’s associates may have financial interest in the subject company. ESL and/or its Group Companies, their Directors, affiliates and/or employees may have interests/ positions, financial or otherwise in the Securities/Currencies and other investment products mentioned in this report. ESL, its associates, research analyst and his/her relative may have other potential/material conflict of interest with respect to any recommendation and related information and opinions at the time of publication of research report or at the time of public appearance.

Participants in foreign exchange transactions may incur risks arising from several factors, including the following: ( i) exchange rates can be volatile and are subject to large fluctuations; ( ii) the value of currencies may be affected by numerous market factors, including world and national economic, political and regulatory events, events in equity and debt markets and changes in interest rates; and (iii) currencies may be subject to devaluation or government imposed exchange controls which could affect the value of the currency. Investors in securities such as ADRs and Currency Derivatives, whose values are affected by the currency of an underlying security, effectively assume currency risk.

Research analyst has served as an officer, director or employee of subject Company: No

ESL has financial interest in the subject companies: No

ESL’s Associates may have actual / beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report.

Research analyst or his/her relative has actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report: No

ESL has actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report: No

Subject company may have been client during twelve months preceding the date of distribution of the research report.

There were no instances of non-compliance by ESL on any matter related to the capital markets, resulting in significant and material disciplinary action during the last three years except that ESL had submitted an offer of settlement with Securities and Exchange commission, USA (SEC) and the same has been accepted by SEC without admitting or denying the findings in relation to their charges of non registration as a broker dealer.

A graph of daily closing prices of the securities is also available at www.nseindia.com

Analyst Certification:

The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.

http://www.nseindia.com/


BAJAJ AUTO


Additional Disclaimers

Disclaimer for U.S. Persons

This research report is a product of Edelweiss Securities Limited, which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account.

This report is intended for distribution by Edelweiss Securities Limited only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor.

In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, Edelweiss Securities Limited has entered into an agreement with a U.S. registered broker-dealer, Edelweiss Financial Services Inc. ("EFSI"). Transactions in securities discussed in this research report should be effected through Edelweiss Financial Services Inc.

Disclaimer for U.K. Persons

The contents of this research report have not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000 ("FSMA"). In the United Kingdom, this research report is being distributed only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the FSMA (Financial Promotion) Order 2005 (the “Order”); (b) persons falling within Article 49(2)(a) to (d) of the Order (including high net worth companies and unincorporated associations); and (c) any other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”). This research report must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this research report relates is available only to relevant persons and will be engaged in only with relevant persons. Any person who is not a relevant person should not act or rely on this research report or any of its contents. This research report must not be distributed, published, reproduced or disclosed (in whole or in part) by recipients to any other person. Disclaimer for Canadian Persons

This research report is a product of Edelweiss Securities Limited ("ESL"), which is the employer of the research analysts who have prepared the research report. The research analysts preparing the research report are resident outside the Canada and are not associated persons of any Canadian registered adviser and/or dealer and, therefore, the analysts are not subject to supervision by a Canadian registered adviser and/or dealer, and are not required to satisfy the regulatory licensing requirements of the Ontario Securities Commission, other Canadian provincial securities regulators, the Investment Industry Regulatory Organization of Canada and are not required to otherwise comply with Canadian rules or regulations regarding, among other things, the research analysts' business or relationship with a subject company or trading of securities by a research analyst.

This report is intended for distribution by ESL only to "Permitted Clients" (as defined in National Instrument 31-103 ("NI 31-103")) who are resident in the Province of Ontario, Canada (an "Ontario Permitted Client"). If the recipient of this report is not an Ontario Permitted Client, as specified above, then the recipient should not act upon this report and should return the report to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any Canadian person.

ESL is relying on an exemption from the adviser and/or dealer registration requirements under NI 31-103 available to certain international advisers and/or dealers. Please be advised that (i) ESL is not registered in the Province of Ontario to trade in securities nor is it registered in the Province of Ontario to provide advice with respect to securities; (ii) ESL's head office or principal place of business is located in India; (iii) all or substantially all of ESL's assets may be situated outside of Canada; (iv) there may be difficulty enforcing legal rights against ESL because of the above; and (v) the name and address of the ESL's agent for service of process in the Province of Ontario is: Bamac Services Inc., 181 Bay Street, Suite 2100, Toronto, Ontario M5J 2T3 Canada.

Disclaimer for Singapore Persons

In Singapore, this report is being distributed by Edelweiss Investment Advisors Private Limited ("EIAPL") (Co. Reg. No. 201016306H) which is a holder of a capital markets services license and an exempt financial adviser in Singapore and (ii) solely to persons who qualify as "institutional investors" or "accredited investors" as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore ("the SFA"). Pursuant to regulations 33, 34, 35 and 36 of the Financial Advisers Regulations ("FAR"), sections 25, 27 and 36 of the Financial Advisers Act, Chapter 110 of Singapore shall not apply to EIAPL when providing any financial advisory services to an accredited investor (as defined in regulation 36 of the FAR. Persons in Singapore should contact EIAPL in respect of any matter arising from, or in connection with this publication/communication. This report is not suitable for private investors.

Disclaimer for Hong Kong persons

This report is distributed in Hong Kong by Edelweiss Securities (Hong Kong) Private Limited (ESHK), a licensed corporation (BOM -874) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to Section 116(1) of the Securities and Futures Ordinance “SFO”. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The report also does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of any individual recipients. The Indian Analyst(s) who compile this report is/are not located in Hong Kong and is/are not licensed to carry on regulated activities in Hong Kong and does not / do not hold themselves out as being able to do so. Copyright 2009 Edelweiss Research (Edelweiss Securities Ltd). All rights reserved.

Aditya Narain

Head of Research

[email protected]

key data multiple tailwinds to counter headwinds

Documents