Bajaj Auto: Net drops 78% YoY - Views on News from Equitymaster

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Bajaj Auto: Net drops 78% YoY

Jan 16, 2001

Bajaj Auto, India's largest two wheeler manufacturer has reported dismal results for the 3QFY01. The company's net profit at Rs 285 m for the 3QFY01 fell by 78% YoY as compared to Rs 1,286 m for the 3QFY00. The performance was also worse off by 47% as compared to its 2QFY01 net of Rs 538 m.

(Rs m) 3QFY00 3QFY01 Change
Sales 9,973 8,986 -10%
Other Income 745.1 468.2 -37%
Expenditure 8,489 8,404 -1%
Operating Profit (EBDIT) 1,484 582 -61%
Operating Profit Margin (%) 14.9% 6.5%
Interest 6.1 27.1 344%
Depreciation 366.2 473.4 29%
Profit before Tax 1,856 550 -70%
Other Adjustments - 265
Tax 570 0 -100%
Profit after Tax/(Loss) 1,286 285 -78%
Net profit margin (%) 15.0% 5.5%
No. of Shares (eoy) (m) 119.4 101.2
Diluted number of shares 119.4 101.2
Diluted Earnings per share* 43.1 11.3
*(annualised)

The company's sales declined by 10.6% to Rs 9.0 bn in the 3QFY01, as against Rs 9.9 bn in the 3QFY00. The main reason for this dismal performance is the fact the company's volumes declined sharply in the 3QFY01, especially in the scooter segment. The fall in volumes has been steeper than the previous two quarters.

The company's volumes in the scooter as well as step thru segments were dismal for the period April-December 2000. This is mainly due to change in consumer preferences.

Another factor to contribute to the decline in net is the fall in other income. The decline in other income by 37% YoY was a result of unfavourable market conditions in the 3QFY01 and the fall in surplus funds available as a result of the company's buy back in October 2000. The company has spent Rs 7.3 bn for its buy back. In terms of extraordinary expenditure the company has spent Rs 265 m per quarter for its voluntary retirement scheme.

The company's operating margins declined from 14.9% in the 3QFY00 to 6.5% in the 3QFY01. This is mainly due to unfavourable sales mix as high margin scooters accounted for only 33% of volumes in the 3QFY01 as comapred to 52% in the 3QFY00. However, it should be noted that the company's operating margins have improved by 90 basis points since the 2QFY01 figure of 5.6%. This improvement has come mainly from the fact that Bajaj Auto rationalised its discounts in November 2000 as well as increased prices of its motorcycle models.

The company has managed to garner a 21% market share in the motorcycle segment. It plans to continue to be aggressive in this area and is planning launches in this segment in the 100 cc - 175 cc over the 4QFY01.

Volumes 3QFY01 3QFY00 % change
Scooters 95,040 191,801 -50%
Sunny/Spirit 13,081 20,729 -37%
Step thrus 30,429 51,392 -41%
Japanese Motorcycles 112,307 67,289 67%
Three-Wheelers 35,744 43,005 -17%
Total 286,601 374,216 -23%

On the current price of Rs 253, BAL is trading at 5.9x FY02E EPS of Rs 42.4.

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