Analysis - Bajaj Auto Vs Hero MotoCorp

In the current negative sentiment of the Auto sector, SIAM has lowered the growth guidance for the four wheeler segment but has retained the guidance for the two wheelers. In our latest analysis in our flagship magazine Dalal Street Investment Journal we have covered comparative analysis of countries top two wheeler companies named Bajaj Auto and Hero MotoCorp.

Bajaj Auto (BAL) and Hero MotoCorp (HMCL) together have 80% of market share in the domestic motorcycle segment. Interesting both the companies are also Sensex participants with a weight of 2.99%. The growth angle to the companies is that they have exposure to the rural segment where there is the next wave of growth.

The distinctive feature of their business is that BAL has three wheeler categories. BAL also derives exports revenues which forms a major part of its revenues. HMCL also has exports revenues but it does not have any three wheeler category.

In the highly competitive market, both the companies have a long list of brands. BAL has a top brand Pulsar while HMCL also has brands like CBZ, Karizma, and Splendor etc. Over the years HMCL has played volume game while BAL has placed most of its brands in the premium segment. BAL also markets foreign brands in India. HMCL on the other hand is also expected to enter in the premium segment and has sourced the high end technology in partnership with a US based company Erik Buell Racing (EBR).

On the financial front HMCL has shown a volume as well as revenue growth over the past few years and in that terms it has outpaced the industry as well as its rival BAL. Bajaj on the other hand is more profitable and has show a very good margin improvement in last 5 years.

There are also few other factors that we have considered in our analysis such as valuation, the issues of the inventory pile ups, Capex plans, tax outgo’s etc and one can read that in detail in the three page analysis in the magazine.

We are advising readers to read the detailed analysis of these two companies in our latest issue which will be available on the stands tomorrow i.e. Monday i.e.  July 30, 2012.