Business Standard

Bajaj Auto: Riding strong in tough conditions

While demand has been weak, the company has done well to curb the impact on its financials

Related News

Volume push from product launches and exports are likely to be the mainstay and provide some cushion to in FY13, as growth in the domestic market continues to be tepid. This is also visible in the September quarter. Despite new product launches in the quarter — the and the — motorcyle sales fell seven per cent, in the domestic market.

However, it bucked the trend in the three-wheeler segment, due to introduction of three-wheeler diesel variants which helped domestic volumes grow three per cent against near-flat industry growth. While demand has been weak, the company has done well to curb the impact on its financials. Thus, despite a 10 per cent fall in volumes (two- and three-wheelers), revenues fell only four per cent, on higher realisations. Rising sales of its three-wheelers, Pulsar and higher range of the Discover motorbikes helped realisation improve six per cent year-on-year (YoY).

These also reflected in the Ebitda margins, at 18.4 per cent, down 40 basis points over the year-ago quarter but up 50 basis points sequentially. The company expects to maintain margins on price hikes for three-wheelers as well as Discover brands in July and October. The Street has given a thumbs up to the results, with the stock up nearly one per cent. At Rs 1,781, it trades at 13.7 times FY14 estimates, with price targets of Rs 1,850-2,000.

Domestic mkt: Muted growth
Domestic motorcycles volume fell 12 per cent YoY in the September quarter due to the slowdown. The muted picture continues with the first few days of the festival season showing flat to marginally positive growth, says the company’s president, finance, Kevin D’Sa. But it has improved market share both in the commuter segment (Discover) by 600 basis points to 25 per cent and the premium segment (Pulsar) by 500 basis points to 50 per cent in April-September.

While the management has maintained a five million (domestic/exports) target for FY13, analysts say it could achieve 4.4-4.5 million. Analysts say it is likely to bank on new launches (bike in January) to boost volumes. Things could look up in the three-wheeler segment, given the launch of diesel variants. If the introduction of new three-wheeler permits in Delhi and Hyderabad comes through, average monthly volumes could improve from 18-19,000 now to 20-22,000 a month.

Export focus
While exports (35 per cent of volumes) grew 31 per cent YoY in FY12 to 1.5 million units, these are down five per cent in the first half of the year at 800,000 units. For the September quarter, while motorcycle volume growth for exports fell less than that domestically, the fall was higher in three-wheeler exports, which saw a 22 per cent fall due to issues with the Sri Lankan market. Sales have recovered though on price cuts but are still 20-25 per cent lower than average market volumes.

The company continues to focus on the export markets and expects to ride on its tie-up with and existing distribution networks. The fastest growth is likely to come from Africa, growing at 10-15 per cent, accounting for 45 per cent of export volumes.

While the global slowdown continues to impact sales in non-African markets, entry into new markets and alliances should help. The company continues to stick to its target of doubling export volumes by 2016.

Read more on:   

Read More

Sovereign, pension funds likely to get special treatment

To encourage sovereign wealth funds (SWFs) and pension funds to invest in the Indian debt market, the Securities and Exchange Board of India (Sebi) ...

Quick Links


Market News

Metals fall on Opec's no-cut decision

Copper hits 8-month low on LME, bullion sheds 1%

Sebi in favor of companies formulating policy on dividends distribution

Cash-rich companies may soon have to give a justification for sitting on their cash pile

Markets end at record closing highs on rate cut hopes

The total investor wealth in Indian stock market today hit a record high of Rs 100 trillion

Sensex, Nifty end 1% higher led by rate sensitive shares

The Sensex provisionally ended up 221 points at 28,660 and the Nifty ended up 85 points at 8,579

OPEC just gave the world its biggest QE

Falling crude prices is beneficial for most of the economies around the world apart from the ones that are producing them

Back to Top