Result Update: Bajaj Auto

Result Update: Bajaj Auto

Bajaj Auto Ltd (BAL) reported a net sales growth of 7.9% y-o-y driven by 4.2% y-o-y growth in volumes, which was on back of 31% y-o-y growth in export volumes.

In terms of value, exports were up 44% y-o-y. Domestic volumes were lower by 5%. Realizations were up 3.5% driven by price hikes taken in August 2008. The sales mix has changed significantly on a q-o-q basis with contribution of motorcycles declining by 236bps and that of three-wheelers increasing by 234bps.

The company reported a 10.2% y-o-y fall in operating profit but a 28.9% y-o-y jump in operating profit. OPM expanded 195bps q-o-q but fell 271bps y-o-y. The expansion in margins was on back of price hikes and 13% volume growth in profitable 125cc+ category.

Raw material costs as a percentage of sales was up 164bps y-o-y as steel and aluminum prices have been higher on a y-o-y basis.

PBT for BAL declined by 8.7% y-o-y driven by 14.8% fall in other income and 10.2% y-o-y fall in operating profit. However, effective tax rate for the company declined by 291bps y-o-y and 247bps q-o-q.

With VRS expenses (for workers of Akurdi plant) of Rs611 million APAT was down 22.5% to Rs1,849 million. The company following AS-30 has transferred MTM losses on forwards to hedging reserves in balance sheet.

BAL has a target of exporting 1 million vehicles in FY10. For which, the company is launching a new platform of motorcycles for the overseas markets.

For the domestic markets, the company plans to launch 2 new 125cc+ motorcycles to strengthen its near 50% market share in the segment.

With price hikes taken and commodity prices significantly down form their highs, we believe margins could remain strong in H2 FY09.