Bajaj Auto faces headwinds in export markets

Parvatha Vardhini C BL Research Bureau | Updated on January 17, 2018

Overall volumes growth falls 1.8%

Bajaj Auto’s performance was disappointing in the June quarter, when it reported a tepid 2.8-per cent growth in net sales at ₹5,643 crore and a 2.2 per cent growth in net profit at ₹978 crore, over the same period last year.

Much of the lacklustre show is attributed to headwinds in the export markets.

Despite domestic motorcycle and three-wheeler volumes growing by a strong 16 per cent, depreciation of local currency and non-availability of dollars in the company’s key export markets of Nigeria and Egypt implied that exports dropped by a sharp 22 per cent during this period.

Hence, overall volumes growth for the company fell 1.8 per cent. A weaker product mix, resulting from lower exports and higher sale of entry level bikes such as CT and Platina, prevented any big expansion in margins. So did the fading benefits of cheap raw materials. Raw material cost as a percentage of sales stood at 68.4 per cent against 67 per cent in the June 2015 quarter.

Operating margins came in at 20.4 per cent, a mere 10 basis points higher over the year ago period. A 13 per cent drop in other income did not help profit growth either.

Although challenges on the export front is expected to remain in the near to medium-term, a good monsoon and higher disposable income from the Seventh Pay Commission dole-out are expected to benefit domestic bike sales.

The company has aggressive launch plans for the fiscal which includes an upgrade of the Platina in the commuter segment and a new Pulsar 400 in the premium segment.

Published on July 27, 2016

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