Bajaj Auto's net rises 101% - Views on News from Equitymaster

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Bajaj Auto's net rises 101%

Jan 16, 2002

Bajaj Auto (BAL) has reported a commendable performance in the third quarter ended December 31, 2001 with a 30.3% rise in sales and a 283.4% increase in net profits. However, adjusting for the extraordinary item pertaining to its Voluntary Retirement Scheme (VRS), profits have gone up by 101.0%.

(Rs m) 3QFY01 3QFY02 Change
Sales 7,527 9,811 30.3%
Other Income 468 469 0.3%
Expenditure 6,945 8,230 18.5%
Operating Profit (EBDIT) 582 1,582 171.7%
Operating Profit Margin (%) 7.7% 16.1%  
Interest 27 5 -81.5%
Depreciation 473 445 -6.1%
Profit before Tax 550 1,601 191.3%
Extraordinary item (268) (25) -90.8%
Tax - 495  
Profit after Tax/(Loss) 282 1,082 283.4%
Net profit margin (%) 3.7% 11.0%  
No. of Shares (m) 101.2 101.2  
Diluted Earnings per Share (Rs)* 11.2 42.8  

Production and sales during the third quarter have increased by 15.8% and 26.7% respectively. However, if one were to look at the performance of BAL in the third quarter of 2001, sales, in absolute terms, fell by 23.1% to 374,216 units. So the rise in sales has to be viewed keeping in mind the sluggish demand scenario last year. Besides, motorcycle sales contributed to just 17.9% of unit sales in 3QFY01, which has gone up significantly in the current fiscal. The rebound in sales could be primarily on account of the lag effect. But at the same time, the newly introduced models in the motorcycle segment viz. Aspire, Pulsar and Caliber Croma have performed very well. Production and sales for the first nine months of the current fiscal have gone up by 5.8% and 8.5% respectively.

The third quarter stats…
(Nos) 3QFY01 3QFY02 Change
Production 316,035 365,876 15.8%
Sales 287,078 363,853 26.7%

171 employees opted for the VRS scheme and a sum of Rs 25 m has been charged in the current quarter as extra-ordinary expenditure. A fall in staff cost and an improved working capital management have yielded positive results for BAL. Operating profit has risen sharply on the back of a 840 basis points rise in margins. Lower interest and depreciation costs also have resulted in higher profit growth in 3QFY02. But a higher provision for taxation in line with the new accounting standards has lowered profit growth during the same period.

BAL currently trades at Rs 423 implying a P/E multiple of 9.8x annualised 3QFY02 earnings.

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