Bajaj Auto: Exports help company beat the domestic skid



Tepid results by Bajaj Auto for the quarter ended March 2017 saw the stock close almost two per cent lower on Thursday.

The company posted an 8.5 per cent year-on-year fall in sales to ₹5,120 crore in the three months ended March 2017. A richer product mix tilted towards executive and premium bikes (such as the Dominar 400 launched in December 2016), helped average realisation move up by 1.2 per cent to ₹65,005 per vehicle.

But a 9.7 per cent drop in overall volumes in this period was the key reason for the fall in sales.

In January and February, domestic volumes dropped year-on-year across two and three-wheelers. Although Bajaj Auto did not have as much an inventory of BS-III vehicles as peer Hero MotoCorp, as per market reports, the company did offer discounts to liquidate the stocks towards end-March 2017.

Nevertheless, domestic sales volumes did not look up in March either. The only bright spot was the recovery in export markets, from which Bajaj Auto derives about 30-40 per cent of its revenues. A sharp depreciation of local currency and non-availability of dollars in the company’s key export markets of Nigeria and Egypt bogged Bajaj Auto’s exports down for several months, but two-wheeler exports showed some recovery in this quarter, with volumes growing 6-22 per cent in February and March.

Net profit dipped by 15.5 per cent to ₹802 crore. Apart from the fall in sales, the bottom-line was impacted by a rise in input costs. Raw material cost as a percentage of sales came in at 66.4 per cent, a good 400 basis points higher than in the March 2016 quarter. This squeezed the operating margins, which contracted to 17.4 per cent, compared with 20.2 per cent a year ago.

After the sharp fall in volumes in the January- March 2017 period, the company improved its performance a bit reporting flat sales in April 2017 (over April 2016). The lacklustre demand post the pre-buying of discounted BS-III vehicles in March has been a dampener here.

It expects to do well from this month onwards, and is looking to sell 3.5 lakh vehicles in May. It sold 3.3 lakh vehicles in April.

Although it is still early days, the turnaround in the export volumes seen in the last three months is a shot in the arm for the company. It has done well in Nigeria, Nepal , Bangladesh, the Philippines and Latin America.

The refreshed range of the 2017 model Pulsars, coupled with recent launches such as the V12 and the Dominar 400 should stir interest among domestic customers.

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