Strong order book to make FY22 a record year for exports: Bajaj Auto

Q4 earnings got a boost from higher realisation of exports and larger contribution of pricier models in overall sales

Bajaj Auto expects FY22 to be a record year for the company’s exports. The maker of Pulsar and Discover models has a strong order book for overseas markets, and will serve to the alleviate the pain inflicted Covid-induced disruptions.
 
Net profit for the March quarter rose 2 per cent, while revenue from operations jumped 26 per cent, the company said in a statement. Earnings got a boost from higher realisation of exports and higher contribution of pricier models to sales.
 
“Assuming there are no more ‘Black Swan’ events and no second or third wave globally, FY22 will be a record year for exports. FY20 was our best year, and I think we will beat that,” said Rakesh Sharma, executive director of Bajaj Auto. Close to 75 per cent of it will be driven by Africa, LatAm and West Asia. 
 
Net profit during the three-month period rose to Rs 1,332 crore against Rs 1,310 crore last year, while net revenue climbed up to Rs 8,596 crore from Rs 6,816 crore.
 
However, a sharp increase in commodity prices singed margins, pulling it down to 18.1 per cent from 19 per cent last year. The board has recommended dividend of Rs 140 per share. Total payout towards dividend would amount to Rs 4,051 crore.
 
However, outlook on domestic business remains hazy. At least 25 per cent of Bajaj’s dealerships are shut on account of the lockdown across various states, with another 10 per cent operating for a limited number of hours owing to Covid-related restrictions, said Sharma.
 

“There is a substantial disruption in the domestic market for both two and three wheelers in the country for the month of April. We will continue to face hardships in the first half of May.  But we are hopeful of a strong resurgence in demand once pandemic lets up and vaccination programme gathers momentum,” he added.   
 
Meanwhile, for the quarter gone by, strong exports volumes and better realization bumped up earnings. Bajaj exported a total of 6,35,545 motorcycles and commercial vehicles in the fourth quarter up 24 per cent  year-on-year.  A richer sales mix which came on back of strong volume growth in premium models --- 125cc and above and price increases to beat the cost escalations, also helped. Premium models accounted for 60 per cent of the total unit sales during the fourth quarter, against 46 per cent in the third quarter. “We have been pursuing the premiumization strategy and been particularly very successful with the Pulsar 125,” said Sharma.
 
“We expect Bajaj’s exports business to witness a healthy growth in FY22E on the back of positive traction in African market. We also expect domestic two wheeler industry to recover gradually in 2QFY22E onwards, while its domestic three wheeler business would bounce back strongly in FY22E. In view of healthy exports, recovery in high margin 3W business, margin expansion, improving return ratio and strong balance sheet, We have BUY rating on Bajaj Auto with a 2-year Target Price of Rs3,870,”  said Mitul Shah, Head of Research at Reliance Securities.