Bajaj Auto slips over 4% on concerns of weak export sales

Analysts believe that exports are likely to remain under pressure in \near term, owing to weak macros, adverse currency movements and dollar availability issues in Africa, South Asia and Latin America

Shares of Bajaj Auto slipped 4.4 per cent to Rs 3,679.85 in Monday’s intra-day trade, on concerns of weaker export sales. The company will release its February sales data on Wednesday, March 1, 2023.

In January, the company’s total vehicle sales fell 21 per cent to 2.8 lakh units, due to weaker export sales. Total domestic sales, however, rose 16 per cent to 1.7 lakh units in the previous month as against 1.4 lakh units in January 2022. Exports, meanwhile, declined 47 per cent year-on-year to 1.1 lakh units. The company had shipped out a total of 2.1 lakh vehicles to various overseas markets in January 2022.

Analysts believe that exports are likely to remain under pressure in the near term, owing to weak macros, adverse currency movements and dollar availability issues in Africa, South Asia and Latin America regions.

However, they also expect domestic volumes to grow in double-digits, driven by strong urban demand, better finance availability, and favorable base effect.

"Exports are expected to remain weak in the near term, and the management expects normalcy by end-Q1FY24. In current quarter (Q4FY23), commodity costs are expected to be flat or slightly increase. In electric two-wheelers (E-2Ws), the company plans to launch multiple products across various use-cases in 18 months. E-2Ws are available in 50 cities, and further expansion to 100 cities is expected by Apr-23. In E-3Ws, the first model launch is expected by March, 2023," analysts at Emkya Global Financial Services said.

In Q3FY23, strong double-digit growth in the domestic business helped to offset weak performance in export markets. Hence, analysts at Nirmal Bang Equities anticipate strong show in domestic operations to continue in the near term across segments, led by new refreshed launches and enhanced focus on 125cc+ segment.

"Bajaj Auto will continue to benefit from improving product mix, led by higher share of premium models and increasing share and demand for 3Ws. Furthermore, we believe that the auto major will also benefit from Production Linked Incentive (PLI)/RODTEP (Remission of Duties and Taxes on Export Products) schemes as exports pick up and higher volume will lead to operating leverage benefits. Additionally, benign raw material prices continue to act as tailwind to margins,” the brokerage firm added.

Meanwhile, driven by a healthy uptick in urban markets, coupled with the marriage season in northern regions (20-25 per cent of total demand in key states such as UP and Bihar), 2W demand has slightly improved in February, 2023. This, analysts expect will drive 10-12 per cent YoY growth in retail volumes.