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Business News/ Markets / Mark To Market/  Takes two to tango: Bajaj Auto gains in Q3 with India sales, exports both firing
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Takes two to tango: Bajaj Auto gains in Q3 with India sales, exports both firing

Domestic two-wheeler sales last quarter were aided by festive season sales. Hence, one will have to be watchful on the pace of growth moving forward

Bajaj Auto claimed that production at both the plants in Akurdi and Chakan continued to be normal. Photo: Abhijit Bhatlekar/MintPremium
Bajaj Auto claimed that production at both the plants in Akurdi and Chakan continued to be normal. Photo: Abhijit Bhatlekar/Mint

Bajaj Auto Ltd managed a stellar show in the December quarter, with the recovery in domestic two-wheeler sales complementing the strong momentum in exports. Domestic two-wheeler sales rose 8% in Q3, after declining 35% during the first half of the fiscal year. Three-wheeler exports also normalized and helped the exports division. The contribution of exports to overall vehicle sales grew to 53% in Q3 from 47% in Q3FY20.

The upshot: Bajaj Auto’s revenues grew 17% year-on-year.

Domestic two-wheeler sales last quarter were aided by festive season sales. Hence, one will have to be watchful about the pace of growth. One positive is the rising sales of the executive segment within motorcycles. The company is gaining market share in the 125cc segment. The market share for Pulsar125 in its segment has grown to 22.8% for Q3FY21, the company said. Pulsar sold more than 420,000 units in domestic and export markets, which is the highest ever. This is also positive from a profit margin perspective. Besides, price hikes are also likely to accrue benefits.

That said, the recovery in the three-wheeler segment, which commands high margins, is still awaited in the domestic market. The domestic commercial vehicle business remains impacted because of inadequate demand for short-distance mobility, the company said.

Strong export growth and rebounding two-wheeler sales drive Bajaj Auto's financial performance
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Strong export growth and rebounding two-wheeler sales drive Bajaj Auto's financial performance

Strong growth in exports and rising export contributions remain key drivers for the company’s performance. The African markets that have been impacted less by the pandemic continued to see good momentum in sales. The Latin American markets have also seen a good rebound. Sales in the Asean region, however, remain soft. Rising oil prices are, in turn, aiding economic growth of oil-rich countries and providing traction to demand in these markets.

With the rising export contribution, a favourable exchange rate, rising executive segment sales, and some price hikes, the company reported Ebitda growth of 25% y-o-y. Margins expanded 120 basis points to 19.8% and net profit grew 23% y-o-y. There is, nevertheless, a need to watch out for rising commodity prices. The prices of steel, aluminium and other precious metals used in the manufacture of vehicles are up substantially and pose cost challenges.

Some analysts hope that this will be offset given that the momentum in export sales can continue with a further increase in demand from key markets and revival in demand from Asean countries.

“We expect Bajaj’s exports business to witness a healthy 12% growth in 2HFY21 on the back of revival in African market," said Mitul Shah, head of research at Reliance Securities Ltd.

Shah also said that the domestic two-wheeler industry is likely to continue positive traction in FY22, while the domestic three-wheeler business would bounce back strongly.

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ABOUT THE AUTHOR
Ujjval Jauhari
Ujjval Jauhari is a deputy editor at Mint, with over a decade of experience in newspapers and digital news platforms. He is skilled in storytelling, reporting, analysing and writing about stocks, investment ideas, markets, corporates and more. He is based in New Delhi.
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Published: 21 Jan 2021, 08:01 PM IST
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