Bajaj Auto Q4 net up 10% YoY to Rs 1,469 cr on higher export realisation

Guides for a 10-15% impact on Q1 volumes due to chip shortage. It says rising cell prices could retard transition to EVs

Net profit at Bajaj Auto for the March quarter rose 10 per cent year-on-year. A higher realisation of exports revenue which came on back of favourable currency movement bumped up profits.

An improved volume of the more profitable three-wheeler business also helped the company offset the decline in the domestic motorcycle business.  A severe shortage of the semiconductors led to a steep decline in the domestic motorcycle business.

Revenue from operations at the Pune-based firm declined 7 per cent YoY to Rs 7,975 crore from Rs 8,596 crore a year ago. Net profit during the three month period rose to Rs 1,469 crore from Rs 1,332 crore last year.

The maker of Pulsar and Discover brands has guided for a 15-20 per cent impact on the motorcycle volumes in the June quarter due the semiconductor shortage. It has also cautioned that the increasing cell prices may retard the pace of transition to electric vehicles (EVs).

“The supply chain issue is very serious,” Rakesh Sharma, executive director, Bajaj Auto, told reporters in a post earnings call. The company has been working very closely with the suppliers but “unfortunate outages” at the supplier’s end impacted production by 10-15 per cent in the March quarter.

With April being one of the worst months in terms of semiconductor availability, the June quarter is also likely to crimp the volumes by 15-20 per cent, said Sharma.

The chip shortage has also been impacting the ramp up plans of Chetak, Bajaj’s electric scooter model. The company has a backlog of 15,000 units.  Bajaj retailed a total of 10,000 units of the model in the year that ended on 31 March.  “We haven’t been able to go to more cities with the Chetak because of supply related issues,” said Sharma.

On whether the e-scooter fire incidents will impede electrification of the two wheeler segment Sharma said while the mishaps will change buyer behaviour it’s unlikely to impact the transition to EVs because of a favorable total cost of ownership that the latter commands over ICE.

According to Sharma, the costs of cells which haven’t come down as expected and instead gone back to the 2019 levels could be a bigger retardant in the transition to EVs. “The thermal incident will change the buyer behaviour but the costs will determine the pace of transition,” said Sharma.

Hit by the economic slowdown and semiconductor shortage, domestic motorcycle sales at Bajaj skidded by a third to 339,100 units in the March quarter over the year ago period. It however didn’t have a similar impact on the exports.  Exports of motorcycles dropped 7 per cent YoY to 519,991 units.  

“The motorcycle business has faced a strong headwind from the demand point of view,” said Sharma. The two-wheeler segment, which saw sales plunging to a decade low in FY23, has been facing structural slowdown, he stated.  Having said that, he expects sales to recover marginally in the next couple of months on the back of pent up demand, the ongoing marriage season and a forecast of a normal monsoon which  is likely to revive rural sales.

Meanwhile, the company’s international business recorded its highest ever sales of over 2.5 million units for FY22. With sales of over $2 billion, exports now contribute over 52 per cent of its net sales in value terms.

In a research note shortly after the earnings, Mitul Shah—head of research, Bajaj Auto wrote that the brokerage expects Bajaj’s export business “to witness a healthy growth in FY23E on the back of positive traction in the African market.” It also expects the domestic two wheeler industry to recover gradually going forward in FY23, while its domestic three wheeler business would bounce back strongly in FY23 respectively.

The Board of Directors has approved a dividend at the rate of Rs140 per share (1400 percent) of the face value of Rs10 each on equity shares for the financial year ended March 31, 2022.  

The results came after the market hours ended. Shares of Bajaj Auto ended at Rs3909 apiece, up by Rs18.60, or 0.48 per cent on the Bombay Stock Exchange.