Bajaj Auto dips over 3% after reporting 9% YoY fall in August sales

Shares of Bajaj Auto dipped 3.8 per cent to Rs 2,845 on the BSE on Wednesday after the company reported a 9 per cent fall in its total vehicle sales at 3,56,199 units in August.The Pune-based automaker had sold a total of 390,206 vehicles in August 2019.

Total domestic sales in August stood at 1,85,879 units as compared to 2,08,109 units in the same month of 2019, a drop of 11 per cent, Bajaj Auto said in a regulatory filing.

Total two-wheeler sales declined 1 per cent to 3,21,058 units as against 3,25,300 units in August 2019. Total commercial vehicles sales also plunged 46 per cent in the previous month to 35,141 units as compared to 64,726 vehicles sold in August 2019, it said.

At 1:25 PM, the stock was trading 3.31 per cent lower at Rs 2,860.75 as compared to a flt benchmark S&P BSE Sensex. A total of 13.8 lakh shares have changed hands on the NSE and BSE so far.

The pandemic-induced lockdown dented the first quarter (Q1) earnings at Bajaj Auto over the year-ago period, with volume revenue and profits declining 60 per cent. However, low fixed costs and better export realisations helped cushion the impact of operations on its margins.

Dragged down by poor volumes, which came on the back of a total shutdown in April and partial resumption of operations in May and June, Bajaj Auto's profit after tax (PAT) more than halved to Rs 528 crore, in the June quarter, against Rs 1,126 crore in the year-ago period. 

Revenue from operations during the quarter also fell year-on-year (YoY) by 60 per cent to Rs 3,079 crore, while the overall turnover saw 58.3 per cent YoY drop to Rs 3,417 crore.

The company’s overall volumes (including exports) fell 64 per cent to 443,103 units over the corresponding period.

In a post-results note, Edelweiss Research said, "Key emerging demand trends for Bajaj Auto are: No downtrading visible in domestic motorcycles (MC) category. Moreover, Domestic MC demand (July) reached almost last year’s level, but for intermittent lockdowns (likely to be pent-up rather than fresh demand). In exports, barring a few markets, demand is at ~80 per cent. Domestic 3W (especially passengers) will be last to recover due to financing challenges."

Among key concerns for the company are: rising commodity costs, peaking out of currency benefits, and adverse product mix, it said.

Meanwhile, analysts at Emkay see Bajaj Auto's volume growth muted at 2 per cent CAGR over FY20-23.

Revenue declined 60% yoy to Rs30.8bn (est.: Rs30.6bn), dragged by a 64% fall in volumes. Demand is gradually improving and has reached 80-85% of last year levels in 2Ws in Jul’20, but remains subdued at ~20% in domestic 3Ws and 70-75% in overseas 3Ws.

"Demand outlook remains subdued for high-margin segments such as 3Ws and exports. Domestic 3Ws demand is under pressure due to steep price increases and financing issues. Demand in overseas markets has been impacted due to adverse currency trends. We retain Hold/UW stance in sector EAP, with a TP of Rs 2,978 (Rs 2,629 earlier), based on 14x Sep’22E EPS (FY22E EPS earlier)," the brokerage said in a note.