The share price of Bajaj Auto fell over 1 percent in the early trade on Thursday after the company's first-quarter earnings for fiscal 2020 garnered mixed brokerage reactions.

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The stock fell as much as 1.66 percent to an intraday low of Rs 2,935.00 per share on the BSE. At 11:18 am, the stock was trading at Rs 3,012 per share, down 0.92 percent.

In an exchange filing on Wednesday, the company said that due to the COVID-19 pandemic, all manufacturing operations came to a near standstill for a period ranging from 28 to 43 days between March and May.

“Bajaj Auto could gradually improve the operations from 25 percent when plants were gradually opened in April / May 2020 and have now been able to ramp-up production to almost 70 percent of normal levels. However, things are far from normal as this is an unstable recovery due to sporadic local shutdowns in various parts of the country impacting both, demand as well as supply chain,” the company said.

The company’s exports and domestic sales were both impacted due to restrictions on production from the beginning of the pandemic, it added.

The company on Wednesday registered a sharp 53.1 percent fall in standalone net profit for the quarter ended June 2020 to Rs 528.04 crore as compared to Rs 1,125.67 crore in the same quarter of last fiscal.

Compared annually, the revenue from operations during the first quarter declined 60.3 percent to Rs 3,079.24 crore impacted by lower sales. Sales volume decreased significantly by 64.4 percent to 443,103 units from 1,247,174 units in the year-ago quarter.

CLSA

Global brokerage firm CLSA noted that Bajaj Auto’s revenue (-60% YoY) outperformed volume (-65% YoY) due to a combination of higher export share, better currency realisations, and price hikes.

Management commentary indicated that domestic and export 2W demand has improved to 80-85% of normalised levels, while export 3Ws would be at 70%. Domestic 3W is lagging (20% of normal) due to a significant decline in ride-hailing.

“Indian 2W OEMs have been taking regular price hikes over and above the BS6-related cost increases. Moreover, Bajaj’s 1Q results demonstrate that 2Ws are better prepared than other segments to control fixed costs. We forecast Bajaj’s FCF conversion at 54-70% of Ebitda in FY21-23. The stock offers FY22 FCF yield of 5.9%,” CLSA said.

A sharper-than-expected slowdown in domestic and export markets as well as an increase in price competition are key risks to our thesis, it added.

CLSA reiterated 'Buy' rating and increased its target price to Rs 3,550 from Rs 3,400 per share earlier.

Citi

Citi believes that the company’s earnings were better mixed as cost control measures offset weak volumes. Realisations were marginally up along with slight cuts in costs, especially in fixed costs.

The brokerage maintained 'Sell' rating with a target at Rs 2,200 per share and increased earnings estimates by 3-5% over FY21-23.

Credit Suisse

Credit Suisse sees mixed trends for Bajaj Auto with any rise in premium sales helping the company. Outlook on exports and 3W remains cloudy as well, the brokerage said.

Credit Suisse maintained a 'Neutral' rating with a target of Rs 3,030. It raised FY21/22 23E EPS by 2-4% factoring in the better margins in Q1FY21.

Motilal Oswal

Bajaj Auto’s operating performance was driven by the mix, Fx, and lower other expenses, supporting our view that the company has several levers to protect its margins. 80–85% demand recovery in July for both India (ex-3W) and exports is encouraging, the brokerage said.

Motilal Oswal expects FY21 to be another year of challenges for the domestic 2W industry and Bajaj Auto due to the COVID-19 impact. As a result, the company should see pressure in export volumes as well due to the impact of lower oil prices in some of its key African markets.

“It is relatively better positioned than its mainstream 2W peers owing to its strength in the Entry-level and Premium Motorcycle segments. We estimate volumes to decline by 13.3% in FY21 and grow 10.5% in FY22E,” the brokerage house said.

It has maintained a 'Neutral' rating with a target of Rs 2,960 per share.

Kotak Institutional Equities

The brokerage has maintained 'Buy' rating with a target price at Rs 3,400 per share as the company’s Q1 earnings were in-line with the brokerage estimates.

It expects motorcycle volumes to recover from H2 and believes that the current retail trends look quite encouraging.