BackBajaj Auto Q4 profit rises 29% to Rs803 crore on strong domestic sales
New models drive net sales up 14.71% to Rs5,303.89 crore; poor demand in overseas markets hurt exports
Premium
Mumbai: Bajaj Auto Ltd’s fiscal fourth-quarter profit rose 29% from a year ago as it sold more motorcycles and three -wheelers in its home market.
Net profit for the maker of the Pulsar and Avenger models rose to ₹ 803.06 crore in the three months ended 31 March from ₹ 621.62 crore in the year earlier, Bajaj Auto said in a filing to the stock exchanges on Wednesday. Net sales at the firm rose 14.71% to ₹ 5,303.89 crore from ₹ 4,623.70 crore.
The earnings were in line with analysts estimates. A Bloomberg survey of analysts had estimated net profit of ₹ 803.2 crore on net sales of ₹ 5,256.2 crore.
During March quarter, Bajaj Auto’s sales volume, including exports, grew 11.5% led by a 26% increase in local demand. For the year ended 31 March, Bajaj Auto sold 3.89 million motorcycles and three-wheelers—an increase of 2% from a year ago.
The company’s board has recommended a final dividend of ₹ 5 per share.
“We remain positive as new launches drive domestic volumes and exports outlook improves sequentially," Nitesh Sharma, analyst at Phillip Capital India Ltd, said in a note after the earnings were announced. He reiterated a “buy" rating on the stock with a target price of ₹ 2,870.
All the motorcycles launched by the company in the past one year “have been extremely successful and has resulted in an increase in its share in the domestic motorcycle market by over 300 basis points, to ~19% in March 2016," Bajaj Auto said in a statement. The new models launched in 2015-16 include the Bajaj V and the new Avenger series.
One basis point is one-hundredth of a percentage point.
But the strong performance in domestic market, which came after three years of tepid growth, was offset by poor demand in its overseas markets.
While export of motorcycles fell by 4.1% to 1.46 million units, the overseas shipment of three-wheelers dropped by 1.6% to 280,000 units.
Bajaj Auto attributed the fall to external factors, especially poor economic conditions and severe foreign currency constraints in some of the key importing countries. The tepid sales volume dragged down exports revenue by 3% to ₹ 2,021 crore in March quarter from ₹ 2,091 crore in the year-ago period.
The auto maker’s operating profit margin, a key indicator of profitability, widened to 23.1% during the quarter against 19.4% a year ago because of the higher contribution of three-wheelers and pricier motorcycles in the overall mix. Bajaj’s Pulsar and Avenger motorcycles recorded a growth of 8% during the quarter and helped increase its share in the so-called premium segment to 47% from 43% a year ago.
The trend reversal of domestic sales outperforming exports is likely to continue for Bajaj Auto as the impact of new launches plays out in the coming months, said an analyst at a domestic brokerage, declining to be identified. A good monsoon, as has been forecast by Indian Meteorological Department, is expected to increase demand for motorcycles in rural areas,and Bajaj Auto will benefit from it, he added.
Bajaj Auto’s profit after tax, according to S. Ravikumar, president, business development and assurance, at Bajaj Auto, would have been higher by ₹ 95 crore but for the mark-to-market loss of ₹ 30 crore and CSR (corporate social responsibility) expense of ₹ 65 crore which got back-loaded into the fourth quarter.
Bajaj Auto has outlined a capital expenditure of ₹ 575 crore for 2016-17. This would be utilized for new product development and tooling, he said.
Even as the company is confident of the volume momentum in the domestic market to continue on the back of new models, it remains non-committal on the full-year guidance for exports owing to currency-related problems in Nigeria and some other export destinations.
“We have chosen to play it by the ear and have a rather conservative outlook on exports," Ravikumar said.
To be sure, the weak guidance on exports is a departure from last year when the company was extremely bullish on exports on account of a depreciating rupee and an end to disruptions in its key markets of Egypt and Nigeria. But that was not to be.
Other two-wheeler makers are also weathering a rough ride in Africa and Latin America where lower commodity prices are roiling currencies and depressing growth, Mint reported on 9 May.
For the year ended 31 March, exports accounted for 41% of Bajaj Auto’s revenue.
“Management’s (Bajaj Auto’s) latest guidance of ~1.6 million units exports in fiscal 2016-17 implies a ~10% year-on-year decline. This follows a ~5% decline in fiscal 2015-16 and is a sharp slowdown from 20% plus growth trend since fiscal 2008," wrote Jatin Chawla and Akshay Saxena, analysts at Credit Suisse in a report last month.
On Wednesday, Bajaj Auto Ltd shares rose 4% to ₹ 2,478.85 on BSE while benchmark Sensex rose 2.28% to end at 25,881.17.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
