Bajaj may be in for a rough ride

Primary trigger for weak performance is a 11% drop in motorcycle sales volume for April-June quarter

The country's leading motorcycle maker, Bajaj Auto, is staring at a year-on-year decline of at least 10 per cent in revenue and profitability in the first quarter of FY18, that is April-June. The primary trigger for this weak performance is a 11 per cent drop in motorcycle sales volume for April-June quarter. The commercial vehicles business, primarily three-wheelers, saw an eight per cent drop in volume for the period. 

In addition to a sales volume decline, April-June quarter margin will also see impact from increased raw material prices. Benign commodity prices and increase in revenue had helped most vehicle companies report strong growth in profits for FY17. 

Bajaj Auto posted a consolidated profit of Rs 4,079 crore for FY17. The Pune-headquartered company had a profit of Rs 978 crore for April-June of FY17 on sales of Rs 5,984 crore. Its profit had surged 13 per cent for the quarter from a year ago. 

A recent analyst report from Nirmal Bang said Bajaj Auto expects impact of rise in commodity prices to show in results for April-June quarter of FY18 and the study also expects FY18 margin to be lower than that of FY17. The brokerage also cut the company's earnings per share estimate for FY18. It said there are no immediate triggers for significant sales volume expansion in the coming quarters. A company spokesperson could not be reached for comment. 

Bajaj Auto, the largest exporter of two-wheelers from India, saw domestic sales volume slip 22 per cent for the April-June quarter of FY18. Exports grew eight per cent for the period. But total two-wheeler sales volume (domestic plus export) declined 11 per cent to 775,714 units. 

The company, also the country's largest three-wheeler maker, reported a 30 per cent decline in domestic sales volume but exports improved by 28 per cent for April-June quarter. Total sales of three-wheelers declined eight per cent to 112,720 vehicles. 

Bajaj, KTM to expand partnership

Bajaj Auto and its Austrian partner KTM have decided to expand their partnership to Husqvarna Motorcycles and do its global roll-out in 2018. Bajaj will sell Husqvarna bikes in India and Indonesia the way it sells KTM motorcycles. 

Bajaj had acquired a 14 per cent stake in KTM in 2007 and raised it to 48 per cent, subsequently. Bajaj expects to produce 100,000 units of KTM and Husqvarna in 2017 and expand to 200,000 units in the coming years.