Bajaj Auto Ltd failed to meet analysts’ expectations on September wholesale volumes. The company’s total two-wheeler (2W) volumes fell 3.5% year-on-year (y-o-y) to 348,355 units. This compares to Jefferies India’s estimate of 360,000 units.
Domestic 2W volumes rose 28.2% y-o-y last month but this was more than offset by a 33% drop in the 2W export volumes. The trend is on the same lines as seen in July and August. As such, overall, in the September quarter (Q2FY23), growth in domestic 2W volumes was offset by the sharp drop in 2W exports.
The automaker’s export segment has been a sore point for a while now. The export markets continue to see weakening of local currency and high inflation. Exports form a significant portion of Bajaj Auto’s volumes and demand improvement in these markets would remain crucial for further growth. For perspective, the automaker’s export volume share stood at 58% in FY22.
Akin to the trend seen in the 2W segment in September, domestic three-wheeler (3W) sales volumes grew but 3W export volumes dropped. Overall, 3W volumes rose 13% y-o-y to 46,392 units in September.
Going ahead, there is anticipation that the festive season brings cheer on the domestic front. However, a pick-up in rural demand needs closer tracking. The automaker continues to be plagued by chip shortage but the situation is expected to gradually improve.
As things stand, shares of Bajaj Auto are about 16% below their 52-week high of ₹4,131.75 apiece seen last month. Meaningful upsides hereon would depend on growth in volumes and margin performance. A better situation in the export markets is vital for growth in margins as the export business is comparatively a high-margin one. As such, it remains to be seen how the margins pan out in Q2 as the meaningful benefit from easing commodity costs are expected to reflect in the financials only from Q3 onwards.
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