 "Bajaj Auto: Higher exports, realisations boost performance")
The Bajaj Auto scrip gained three per cent, as operational performance for the December quarter was above expectation. Despite flat volumes (down one per cent), the company managed to improve net sales 10.25 per cent over a year due to higher realisation, up 9.5 per cent.
On profitability, the company beat analyst estimates. Operating margins came in at 21.7 per cent, 140 basis points above analyst estimates of 20.3 per cent. Higher export realisations (rupee depreciation/mark-to-market gains) and better product mix helped boost margins despite lower volumes. A weaker rupee against the dollar (62 now vs 61 a year ago) and higher export share boosted numbers. Exports as a share of overall volumes at 50 per cent are 800 basis points higher than in the year-ago quarter.
Analysts say fears of a sharp Nigerian currency depreciation to the dollar and its impact did not come about. While some of the current inventory would have been exhausted, a part of the forex loss would have been shared with dealers. The depreciation impact could come in the March quarter. Nigeria is a key market, accounting for 30 per cent of export volumes and 13 per cent of overall volumes.
Of concern for the company is the poor showing in the domestic market, where volumes fell 13 per cent over the year-ago quarter. The company has been losing share in the domestic motorcycle market consistently over 18 months. Poor performance of the Discover brand has led to the share coming down 700 basis points, from 24 per cent to about 17 per cent.
Analysts say the market share has bottomed out. There could be a recovery, given new launches. The company is looking at filling product gaps in its portfolio and regaining market share by launching new models and repositioning the Discover brand. It is also looking to strengthen its share (42-45 per cent) in the upper end (125cc and above) and will be launching Pulsar Adventure Sports and Super Sports models in the current quarter. At the entry level, it will be launching a new Platina, with an electric start.
While Bajaj Auto could recover, more analysts are bullish on Hero MotoCorp, given its strong domestic showing, huge export potential and presence in the high-growth scooter market.
On profitability, the company beat analyst estimates. Operating margins came in at 21.7 per cent, 140 basis points above analyst estimates of 20.3 per cent. Higher export realisations (rupee depreciation/mark-to-market gains) and better product mix helped boost margins despite lower volumes. A weaker rupee against the dollar (62 now vs 61 a year ago) and higher export share boosted numbers. Exports as a share of overall volumes at 50 per cent are 800 basis points higher than in the year-ago quarter.
Analysts say fears of a sharp Nigerian currency depreciation to the dollar and its impact did not come about. While some of the current inventory would have been exhausted, a part of the forex loss would have been shared with dealers. The depreciation impact could come in the March quarter. Nigeria is a key market, accounting for 30 per cent of export volumes and 13 per cent of overall volumes.
Of concern for the company is the poor showing in the domestic market, where volumes fell 13 per cent over the year-ago quarter. The company has been losing share in the domestic motorcycle market consistently over 18 months. Poor performance of the Discover brand has led to the share coming down 700 basis points, from 24 per cent to about 17 per cent.
Analysts say the market share has bottomed out. There could be a recovery, given new launches. The company is looking at filling product gaps in its portfolio and regaining market share by launching new models and repositioning the Discover brand. It is also looking to strengthen its share (42-45 per cent) in the upper end (125cc and above) and will be launching Pulsar Adventure Sports and Super Sports models in the current quarter. At the entry level, it will be launching a new Platina, with an electric start.
While Bajaj Auto could recover, more analysts are bullish on Hero MotoCorp, given its strong domestic showing, huge export potential and presence in the high-growth scooter market.