Exports lift Bajaj Auto Q3 earnings to record high

Net sales drop 5.3%, EBITDA margin at 21.1%

Higher export realisation and cost cutting lifted India’s second largest motorcycle maker Bajaj Auto’s standalone net profit by a tenth, year-on-year, to the highest ever for the quarter ended December, despite lower sales.

The Pune-based company’s net profit rose to Rs 904 crore for the quarter from Rs 819 crore in the year-ago period. The rise came even a weak local market dragged down net sales dipped five per cent to Rs 5,025 crore and volume 12 per cent 993,690 vehicles. However, the performance missed the estimates of financial analysts of net sales at Rs 5,350-5,450 crore and net profit at Rs 870-880 crore, respectively.

S Ravikumar, president (business development and assurance), said, “Exports have done very well. Realisations have been remarkably better. We were in a set of export contracts until March last year. From April, there has been a huge jump in exports. The dollar about Rs 50 now in Q3 last year is at slightly over 60 (against the rupee), so that has helped a lot.”

A good part of the increase in profits is also due to mark-to-market transactions, pertaining to foreign currency hedging. In the quarter, the company reported a gain of Rs 95.52 crore on this count, accounted in other expenses. After adjusting for that, by the company’s statement, earning before interest, tax, depreciation and amortisation (Ebitda) increased 5.6 per cent year-on-year to Rs 1,262 crore. Net sales were Rs 5,025 crore for the quarter against Rs 5,307 crore in the year-ago period.

Share of exports in net sales surged to 42 per cent in the quarter from 32 per cent in the corresponding quarter last year. Export revenue grew 24 per cent to Rs 2,123 crore. Demand from Africa, Latin America and Asean lifted export revenue for the company.

The company’s operating Ebitda stood at 21.1 per cent for the quarter against 19.8 per cent in the year-ago period.

Rikesh Parikh, vice-president, institution corporate broking, Motilal Oswal Securities, said, "Bajaj Auto performance has been impacted by slower growth in motorcycle segment, while scooter segment has gained traction, where they are not present, resulting in loss of market share and volumes."

Slowdown and intensified competition have hit Bajaj in the domestic market.

The company said that though the festive days in the quarter were 'reasonable but not robust', November and December sales have remained sluggish.

As a result, its market share in the bikes category at slightly over 20% at the end December is the worst since the five year peak of 27% recorded in the end of 2010-11. During the same time Honda has doubled its share in motorcycle segment to over 15%.

However with the ramp up in Discover 100M volumes and with the subsequent launch of a new Discover 125 in March the company hopes to reverse the trend and recoup the lost market share. From a typical 200,000 units per month Bajaj Auto bike sales fell to 150,000-160,000 per month.

"We should be able to do 200,000 units per month from February as there will be the full impact of the Discover 100M sales. We are not expecting to see any great spark in industry-wide demand though. Exports will continue to do well in Q4", added Ravikumar.  

Due to tight market conditions the company was not able to pass on around Rs 40 crore or Rs 4000 per three-wheeler hike to the customer and was absorbed by it. This was felt on the facelifted three wheeler. However, with input costs expected to soften in the final quarter the company hopes to offset the cost hit in Q3.

Particulars	Oct-Dec 2012	Oct-Dec 2013	% Growth
Sales in numbers	1,127,741	993,690	-11.88
Net Sales	5,307.20	5,024.76	-5.32
Expenditure	4,442.04	4,042.01	-9
Net Profit	818.74	904.55	10.48

In Rs Crore
Source: Company