Bajaj Auto Q1 results: Exports boost net profit by 11%, revenue up 8%

Bajaj Auto reported better-than-expected earnings for the quarter that ended in June over the corresponding period last year as higher realisation from exports which came on back of rupee’s depreciation against the US Dollar, bumped up the overall margins.  The share of exports in the company’s total volumes (two and three-wheelers) during the quarter was 62 per cent.

A better export realisation helped the firm offset the loss in production volumes – as high as 40 per cent in the domestic market.  

Net profit during the quarter rose 11 per cent year-on-year to Rs1173 crore in the June quarter over Rs1061 crore. When compared with the preceding quarter the net profit crimped to 20 per cent.

The quarter-on-quarter decline looks optically higher due to one-time exceptional gain of ₹315 crore (incentive receivable from the state government of Maharashtra for the period April 2015-March 2021) booked in Q4FY22, said a post earnings research note by ICICI Securities.

Revenue from operations rose 8 per cent year-on-year to Rs8005 crore over Rs7386 crore. A Bloomberg poll of analysts had estimated a net profit of Rs1109 crore from net sales of Rs7904 crore.

Even as the domestic volumes – led by a shortage of semiconductors facing the two wheeler business, dropped 1 per cent to 3,52,836 units against 357,137 units over the same period, a marginal decline in the two wheelers of 4 per cent and better realisation in exports revenue helped the company’s profitability. As a result, its Ebitda (earnings before interest, tax, depreciation and amortisation) increased 100 basis points to 16.6 per cent from the year-ago-quarter. The gains were largely due to a favourable exchange rate.

Meanwhile, Bajaj Auto’s domestic motorcycle volumes were severely constrained due to the chip shortage—a lot more than its peers in the industry, conceded Rakesh Sharma, executive director at the firm.

The company’s two wheeler volumes got impaired by as much as 40 per cent in the domestic market and 20-25 per cent at an aggregate level (including exports).

“The worst is already over,” Sharma told reporters. He expects all the initiatives the company has taken in the recent past to address semiconductor shortage will help it recover the volumes month-on-month. It will also focus on replenishing stocks at the channel partners. The stock has hit an all-time low, he pointed out.

Sharma said as much the company has gained from rupee’s depreciation against the dollar in terms of realisation, most of the company’s export markets have been hit by the weakening of the local currencies against the US Dollar. “There were hardly any emerging markets which didn’t see its currency tumble. We are in the midst of a perfect storm,” remarked Sharma. He however, doesn’t see it impacting the overall export volumes beyond a quarter.