Review
In this edition, we have reviewed BAJAJ AUTO LTD. and Kansai Nerolac Paints Ltd. We suggest our reader-investors to HOLD in BAJAJ AUTO LTD. and Kansai Nerolac Paints Ltd
We had recommended Bajaj Auto Limited in Volume 36, Issue No. 6, dated February 2-15, 2021, under the ‘Analysis’ segment.The recommended price for the stock was Rs4,149.75. We had recommended the stock on the basis of the optimistic growth prospects of the company. Bajaj Auto Limited is an Indian multinational two-wheeler and three-wheeler manufacturing company based in Pune, Maharashtra. The company manufactures motorcycles, scooters and auto rickshaws and is a part of the Bajaj Group. The consolidated quarterly financials of the company reported that the net sales and other operating income were recorded at Rs7,386.04 crore in Q1FY22 as compared to Rs3,079.24 crore in Q1FY21, recording robust growth.
The operating profit ascended attractively by 93.92 per cent from Rs746.30 crore in Q1FY21 to Rs1,447.26 crore in Q1FY22. The net profit of Q1FY22 stood at Rs1,059.21 crore in comparison with net profit of Rs527.93 crore in Q1FY21, doubling the number. On the annual front, the net sales and operating income descended by 7.28 per cent from Rs29,918.65 crore in FY20 to Rs27,741.08 crore in FY21. Operating profit dropped by 6.33 per cent in FY21 recording at Rs6,201.14 crore as compared to Rs6,620.21 in FY20.
The net profit on annual basis plunged by 6.95 per cent, recording at Rs4,550.70 crore in FY21 as compared to Rs4,890.40 crore in FY20. Recently, the central government has approved two-wheeler ambulance uses in India, which is likely to open a big two-wheeler ambulance market in the domestic automobile segment. Pertaining to the approval, Bajaj Auto will have leverage as the company has already supplied two-wheeler ambulances to the Andhra Pradesh government. With this, Bajaj Auto already has technology and infrastructure to commence production and satisfy the demand emerging in the near future. Hence, bearing a bullish outlook on the company’s growth in the future, we recommend HOLD.
We had recommended Kansai Nerolac Paints Limited in Volume 36, Issue No. 6, dated February 2-15, 2021 under the ‘Choice Scrip’ segment. The recommended price for the stock was Rs585.35. We had recommended the stock on the basis of the company’s expanding position in the paints sector. Kansai Nerolac Paints Limited bears to be the largest industrial paint and third-largest decorative paint company of India with its operations in Mumbai. It is a subsidiary of Kansai Paint of Japan. The financial performance of the company depicts that on a consolidated quarterly basis the net sales and other operating income was recorded at Rs1,402.76 crore in Q1FY22 as compared to Rs638.92 crore in Q1FY21, yielding an attractive rise.
The operating profited ascended robustly from Rs84.98 crore in Q1FY21 to Rs200.46 crore in Q1FY22. The net profit for the quarter registered at Rs111.38 crore in Q1FY22 as compared to net profit of Rs29.64 crore in Q1FY21. On the annual front the net sales and operating income squeezed by 3.9 per cent from Rs5,279.97 crore in FY20 to Rs5,074.25 crore in FY21. The operating profit of Rs829.99 crore of FY20 grew by 8.61 per cent to reach Rs901.49 crore in FY21. FY21 reported a net profit of Rs525.72 crore in comparison to net profit of Rs515.78 crore reported in FY20.
During the quarter, the company focused on selling a better product mix and kept pace with the aggressive cost control programme and wise management of overheads. In June, the company saw a revival of demand in decorative paints while the industrial paints’ demand still remained subdued. With the vaccination programme underway and forecast of a good monsoon, the company expects further rise in demand and would be very keen in seeking price increases. Moreover, enhanced consumer awareness in the segment and per capita paint consumption in India is expected to boost the paints and coatings industry. Hence, we recommend HOLD
(Closing price as of Sept 03, 2021)