Buy Recommendation

keep buying on Bajaj Auto. Bajaj Auto’s 1QFY09 standalone numbers were below our estimates at EBIDTA (by10%) and Net profits (by 8%) level. There are no comparable numbers on YoY basis onaccount of demerger. We attribute the variation to (1) higher pressure on the rawmaterial front. Raw material as a % of sales was at 75.5% against our expectation of 73.3%. (2) Higher effective tax rate 33% against our expectation of 29%. The keyreasons for the deviation vis a vis our estimates are that we had factored in higherprofitability of Pantnagar plant, resulting in lower RM to sales ratio and also lowereffective tax rate on the assumption of direct tax benefits from its Pantnagar plant.Adjusting for the higher tax rate the net profits would have been Rs 1.85, against ourexpectation of 1.9 bn.