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Bajaj Auto’s sales target is ambitious

Bajaj Auto’s sales target is ambitious
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First Published: Mon, Apr 05 2010. 11 15 PM IST

Updated: Mon, Apr 05 2010. 11 15 PM IST
Bajaj Auto Ltd’s desire to avoid a comfort zone is visible in its guidance for fiscal 2011. India’s second largest two-wheeler maker has set an aggressive target of growing volumes by 40% over the previous year by selling 4 million vehicles, including two- and three-wheelers.
Vehicle sales grew by 30% to 2.85 million in fiscal 2010, making it a tough act to better. March indicates robust motorcycle offtake, as sales rose by 84% over the year-ago period, and by 4% over February.
Graphic: Naveen Kumar Saini/Mint
Will Bajaj be able to meet its target? It is now established that the ramp-up in its motorcycle sales began from September and was on account of two new products, Discover and the new Pulsar. Today, these two products account for nearly 70% of the company’s total volumes. In March alone, the company produced 97,096 and 72,804 units of Discover and Pulsar, respectively.
But the company’s performance in the fourth quarter was only in line with that of the third quarter. Motorcycle sales volume, both domestic and exports, in both quarters averaged 710,000 units. Although year-on-year sales growth appears high, it is not so on a sequential basis.
This may change as Bajaj is expanding its capacity, which will reach 5 million by fiscal 2012. Still, analysts believe that a sales figure of about 3.6 million vehicles is more realistic, one that assumes a growth rate of 28% in motorcycle sales. Fiscal 2011 will be the first full year of sales for the new Pulsar and the Discover, which will contribute to growth.
But Bajaj sold only 800,000 vehicles in the March quarter, based on which its full-year sales target seems ambitious. It calls for a different strategy to ramp up sales growth and, maybe, even a new product launch. It will still have to contend with competitors’ growth strategies, which may affect its projections.
While input costs are on the rise, Bajaj said that it has maintained its profitability. In fiscal 2010, its operating profit margins averaged 22% for the last three quarters.
Bajaj Auto’s shares rose by nearly 6% on the Bombay Stock Exchange to Rs2,115 each while the benchmark Sensex index closed about 1% higher. Market leader and competitor Hero Honda Ltd’s shares, too, were up 4% at Rs2,013 each, as its sales rose by 17% to 4.6 million two-wheelers in fiscal 2010.
Write to us at marktomarket@livemint.com
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First Published: Mon, Apr 05 2010. 11 15 PM IST