Bajaj Auto profit drops by 18.6%, misses estimates

Drop in sales volumes at home and abroad, plus one-off expenses; however, things back on track in June quarter, assures firm; positive expectation from analysts

The net profit of Bajaj Auto, the country's third-biggest two-wheeler producer, slumped 18.6 per cent in the final quarter (Q4) of 2014-15, the third fall in a row as domestic and export volumes faced severe headwinds.

The Pune-based manufacturer's standalone net profit was Rs 622 crore for the quarter ended March as against Rs 763 crore in the same quarter of 2013-14. The Bloomberg consensus estimate was of Rs 668 crore. This measure has shown a drop in four of the past five quarters when compared to the corresponding one of the previous year.

Total sales volume fell 16 per cent in the quarter to 782,669 units as against 935,782 a year before. In the domestic market, by end-April, its market share in motorcycles was 18.2 per cent as against the projected 22-23 per cent by March-April.

"Q4 faced severe headwinds in various international markets on account of devaluation of the local currency and state elections in Nigeria (a big export market), availability of dollars for imports and other macro economic uncertainties," it said.

Net sales dipped four per cent to Rs 4,624 crore for the quarter as compared to Rs 4,823 crore in the same quarter of 2013-14. The earnings before interest, tax, depreciation and amortisation (Ebitda) margin was 19.4 per cent as against 20.6 per cent earlier.

Its domestic two-wheeler sales have been on a decline, primarily due to lacklustre performance by the Discover, one of its mainstay brands. The Pulsar, Platina and CT100 have generated positive demand, said a company executive.

S Ravikumar, president, business development and assurance, said: "The new Pulsars are doing very well. The Platina ES and CT now average around 80,000 a month from 40,000 earlier. We have grown our market to 40 per cent in the entry segment. We are confident of achieving 23 per cent share in the (financial year's) second half, in Q4."

Two one-off expenses also affected margins in the quarter.

The board of directors recommended a dividend of Rs 50 a share. The total dividend amount and tax thereon amounts to Rs 1,735 crore.

 The company said two rate cuts by the Reserve Bank during Q4 resulted in an increase in charges due to the actuarial valuation for gratuity, from Rs 31 crore the previous year to Rs 90 crore this year. A further provision of Rs 7 crore was made on account of a fire at the Akurdi (Pune) factory in January.  

Arun Agarwal, analyst, Kotak Securities, said: "The fall in domestic and export volumes impacted the Q4 financial performance. The adjusted Ebitda margin contracted due to negative operating leverage. Lower revenues and margin led to adjusted net profit declining during the quarter. But, the results (after adjusted for one-offs) were slightly better than expected. In terms of volume growth, we expect FY16 to be a recovery year and expect strong growth in FY17.”

The export markets of Bajaj have shown a sharp change since last month. Orders from Nigeria, Egypt and Sri Lanka, the three biggest for the company, are back on track, said Ravikumar. "Exports of two-wheelers and three-wheelers bounced back to 162,000 in April," he said. "May is looking very good and we have orders for June already. We are confident of clocking half a million in export, another half a million in domestic and 60,000 three-wheelers in Q1 (of 2015-16), that is 1.6 mn in Q1."

The board of directors recommended a dividend of Rs 50 a share. The total dividend amount and tax thereon amounts to Rs 1,735 crore.