Bajaj Auto posted a better than expected earnings for the March quarter over the year ago period as strong export volumes of motorcycles, coupled with favourable exchange rate, helped the company offset the decline in the domestic market.
Profit before tax at the firm contracted 8.2 per cent, while revenue from operations shrank 8 per cent over the corresponding quarter. Profit after tax remained almost unchanged in the period under review.
Revenue from operations at the firm (the manufacturer of Pulsar and Discover models) during the quarter decreased to Rs 6816 crore from Rs7,420.54 crore a year ago, while PBT declined to Rs1,721.23 from Rs 1,875.86 crore. The overall volumes at the Pune-based company fell 17 per cent to 991,961 units over the year ago period. It was dragged down by a 17 per cent decrease in the domestic market and a 21 per cent fall in overseas shipment of the three wheelers.
The Rajiv Bajaj-led company remains optimistic of the road ahead even as the lock down due to the Covid-19 pandemic has crippled the economy. “We expect a smart recovery in the second half of the year,” Rakesh Sharma, executive director at the firm said in an post earnings investor call, pointing out that over the next few months, as one learns to live with the pandemic and different agencies get a better grip on the situation and normalcy is restored in retail finance and supply chain, things will improve.
“The future is really uncertain. But we will continue to march ahead for a sustainable and profitable growth,” said Soumen Ray,
chief financial officer at the company," he said.
Analysts were taken by surprise with the earnings performance, but they don’t share the same optimism as the management. “Bajaj Auto has delivered a strong operating performance and the earnings are much better than our estimates,” said Mitul Shah, vice president, research at Reliance Securities.
Bajaj will face a tough time in the export business due to lower crude prices in its major export destinations such as Africa and Middle East. Moreover, its high margin three wheeler business will recover with a lag effect as people shun public transport in favour of personal transportation. This will weigh on the company’s profitability going forward, said Shah.
Despite the headwinds Sharma was bullish in his commentary. “As the Covid situation recedes, we will continue to profit from our strong position in Africa,” said Sharma pointing out that competition from the Chinese firms in the region remains fragmented.