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Business News/ Companies / Company-results/  Bajaj Auto Q4 profit falls 18.5% to Rs622 crore
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Bajaj Auto Q4 profit falls 18.5% to Rs622 crore

Net sales drops to Rs4,623 crore from Rs4,822 crore as total sales volume falls 16.3% from a year ago to 782,669 units

Weak motorcycle volume in domestic and export markets dragged the earnings before interest, tax, depreciation and amortization margin to 19.4% from 20.6% in the corresponding quarter a year ago. Photo: Ramesh Pathania/Mint Premium
Weak motorcycle volume in domestic and export markets dragged the earnings before interest, tax, depreciation and amortization margin to 19.4% from 20.6% in the corresponding quarter a year ago. Photo: Ramesh Pathania/Mint

Bajaj Auto Ltd’s fiscal fourth-quarter profit dropped 18.5%, missing analysts’ estimates, as it sold fewer motorcycles.

Net profit fell to 622 crore in the three months ended 31 March from R764 crore a year ago. A Bloomberg poll of 31 brokerages had estimated March quarter profit at R668 crore.

Net sales fell to R4,623 crore from R4,822 crore as total sales volume fell 16.3% from a year ago to 782,669 units. The firm’s board recommended a dividend of 50 per share. “The results were disappointing but the outlook is positive," said Joseph George, an analyst at IIFL Ltd.

In a conference call with analysts, Keven Dsa, chief financial officer, said that, encouraged by the response to its new models, Bajaj expects its domestic market share to rise to 24% by the end of fiscal 2016 from the current 15%. Most of the growth, he added, will come from motorcycles with an engine displacement of 125cc and above.

Helped by new launches like the CT100, which it claimed has been received well, and the new Pulsar range, Bajaj saw its market share rise by 300 basis points. One basis point is 0.01 percentage point. Still local motorcycle sales fell 23% to 379,437 units in the March quarter. “The performance in the domestic market was below expectations," the firm said in a statement.

Weak motorcycle volume in domestic and export markets dragged the Ebitda (earnings before interest, tax, depreciation and amortization) margin to 19.4% from 20.6% in the corresponding quarter a year ago.

Analysts said that even though the worst may be over for Bajaj in terms of domestic sales, a 24% market share target might not be feasible. “It’s a very tall order considering the increasing intensity of product launches and competition in the local market," said Bharat Gianani, an analyst at Angel Broking Pvt. Ltd.

Meanwhile, Bajaj said it is very bullish on exports in the months ahead mainly on account of a depreciating rupee and an end to disruptions in its key markets in Egypt and Nigeria. Sales in Egypt were hit by the economic crisis. With Saudi Arabia bailing out the nation, demand is expected to revive, Dsa said, adding that the conclusion of Nigeria’s elections has also spurred sales.

With a robust order book from Egypt and Nigeria and the delivery of a backlog order of 110,000 units of the Discover to Sri Lanka, the firm expects to touch exports of 1.8-2 million units in the June quarter. Meanwhile, a weakening rupee is expected to boost its export realization.

Helped by a weaker rupee and improving domestic volumes, IIFL’s George said he expects the company’s margins to improve in the quarters ahead.

Angel Broking’s Gianani, however, expects margins to remain at similar levels. Gains from exports, he said, will be negated by the higher contribution of cheaper models such as the Platina and CT100 in the overall mix, and increasing competition in the motorcycle market, which in turn would hit pricing power.

Bajaj Auto’s commercial vehicle sales for the quarter grew 16% to 519,117. Dsa expects the order book to stay strong. “Fresh permits will be a bonus," he said.

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Published: 21 May 2015, 12:52 PM IST
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