Companies

Bajaj Auto: Exports continue to challenge growth

Parvatha Vardhini C BL Research Bureau | Updated on January 16, 2018

Bajaj Auto has posted muted numbers in the quarter ended September 2016. Overall volumes for the company dropped by 2.3 per cent, driven by the sharp 27 per cent fall in motorcycle and three-wheeler exports.

Despite a 22 per cent growth in domestic volumes, depreciation of local currency and non-availability of dollars in Nigeria and Egypt pulled down export performance. Exports bring about 30-40 per cent revenues for the company.

As a result of this, net sales growth remained tepid, coming in just 1.3 per cent higher at ₹6,705 crore, over the same quarter in 2015.

A weaker product mix, resulting from lower exports and higher sale of entry level bikes such as CT and Platina, prevented any expansion in margins.

So did the fading benefits of cheap raw materials. Operating margins came in at 19 per cent vis-à-vis 19.5 per cent in the September 2015 quarter.

Raw material cost as a percentage of sales stood at 61 per cent against 61.6 per cent in the September 2015 quarter. A 27 per cent jump in other income helped net profit inch up by 6.7 per cent to ₹1,123 crore.

Outlook

The company cut its export target for 2016-17 from 17.5 lakh units to 16 lakh units.

While it has sold about 7.5 lakh units in the first half of this fiscal, meeting this target could continue to be a challenge in the months to come with the situation in its key African markets still remaining uncertain.

To counter this though, it has entered newer markets such as the ASEAN countries, Myanmar and Cambodia. On the other hand, the outlook for the domestic markets looks bright both for both motorcycles and two-wheelers. T

The company will launch its 2017 range of Pulsars, a new 400cc bike and another bike on the ‘V’ platform in the mid-segment, all of which will enrich the product mix and push up realisations.

Bajaj Auto expects to be on a purple patch on three-wheelers too, with its recently launched cargo carriers doing well and with some permits expected to go in their favour in the passenger segment.

Published on October 28, 2016

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