Rajiv Bajaj, MD, Bajaj Auto stating that it was expected post Festive
season and other factors like rising interest rate and petrol rise is
the reason in slowdown in sales. But if you compare Bajaj auto with
its competitors like Honda, Hero MotoCorp, Yamaha and Suzuki whose
sales have increased tremendously on M-o-M basis in the same period.
With the introduction of new variant like CBR150 by Honda, Impulse by
Hero MotoCorp and R15 by Yamaha will have an adverse effect on the
Bajaj premium bikes. Honda has increased its production capacity due
to Alwar plant and its further increasing its capacity to 3.5 lacs
due to setting up a karnatak plant by Oct 2012. With decrease in
waiting period of Honda's unicorn and Shine will give a stiff
competition to discover and pulsar. It is on the verge of launching a
new cheapest 110cc bike ever worth Rs.27, 700 in Indian domestic
market by Jan, 2012. Italian based Piaggio is also penetrating in the
two-wheeler segments with attractive variations of bikes by January
2012.This will have a direct impact leading to a price war within the
two-wheeler bikes in this segment. On an export front, Bajaj auto is
getting hit by Hero MotoCorp, as it is setting up a 100% export plant
in Sanand Gujarat and Honda, through its China plant has introduced
its new variant Honda Ace125cc (pricing 31,000 INR) in Nigerian and
South African market. Hero MotoCorp on the other hand, has initiated
its distribution network in all the 11 countries where Bajaj is
exporting. In three-wheeler segment Hero MotoCorp is coming in a very
big way and Piaggio is increasing its capacity by 40%. According to
the sources, LIC and Citi group have also recommended a sell on Bajaj
Auto. Within a year 11 new models is going to launch in this segment
having an adverse effect on the old model of Bajaj and TVS.
In the current market the most preferred brand of two-wheelers is
Honda which will replace Bajaj's 2nd position by December 2011 & by
March -12, Bajaj will downgrade to 4th position giving its way to TVS
in Indian market.
Considering all this factor, we recommended a STRONG SELL on Bajaj
auto with a target price of Rs 1100.
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