Bajaj Auto's Q4 ride hit by one-off speed-breaker

Higher realisations in domestic and export markets support operating income

Bajaj Auto's March quarter numbers were expected to be muted, as volumes declined 16.4 per cent. However, the actual numbers did not meet the Street’s estimates because of higher provisions for gratuity and loss due to a fire at the Akurdi plant in January. Adjusting for the higher expense, the company’s performance, claim analysts, was better than expected, as realisations were higher.

Net sales declined merely four per cent year-on-year (y-o-y) and 16 per cent sequentially to Rs 4,740 crore, despite a sharper fall in volumes. Post-tax profit was Rs 621 crore, down 18.7 per cent. However, a Rs 90-crore provision for gratuity, against Rs 31 crore the previous year, impacted the bottom line.

The company has not separately disclosed loss due to the fire at Akurdi.  Emkay Global says: “Broadly, apart from the higher gratuity provisioning and loss on account of fire at Akurdi, the results are in line with estimates. Reported net profit stood at Rs 620 crore, only four per cent below estimates, on higher than expected other income (Rs 150 crore), despite a lower operating profit. “Operating income, after adjusting for the higher gratuity payout, was Rs 897 crore.

On the upside, Bajaj  managed to improve realisations, both compared to last year and the previous quarter. Net realisations grew 15 per cent over a year  and 5.4 per cent sequentially; it grew for both domestic and export segments. The operating margin, impacted by higher provisions and other expenses, was 19.4 per cent.

The company has been facing headwinds in the domestic market.  However, analysts believe  exports would continue to support growth even if domestic volumes remain a challenge. Reliance Securities believes with the company revamping its Pulsar portfolio and improving exports, the outlook could be better in the year ahead. Most analysts remained neutral on the stock, as there wasn't enough clarity on demand in India and abroad.