Mar 4, 2003|
Bajaj: Fades a shade
Bajaj Auto declared its February month volume performance recently. In continuation with its performance in the first ten months of the current fiscal year, February has also been an encouraging month. While motorcycle volumes have increased by 38%, there has been a sharp unexpected decline in ungeared scooter volumes.
As against the average monthly volumes of 55,000 units in FY02, Bajaj has been clocking in excess of 70,000 units in the current fiscal year. This is on the back of the impressive performance of both 'Boxer' and 'Pulsar'. As far as 'Pulsar' goes, we expect the company to cross the targeted 120,000 units in the current fiscal year. We had projected a motorcycle volume sales of around 858,000 units for FY03, which will have to be upgraded marginally to reflect incremental volumes flowing from 'YBK', the new entry-level model. Geared scooter sales, in line with expectations, continue its downtrend. The aggressive promotion of 'Legend', the four-stroke geared scooter, has done little to spruce up overall volumes.
There has been a sharp fall in ungeared scooter sales in February 2003, which could be largely on account of the company losing out market share to more competitive models like Honda's 'Dio' and Kinetic's 'Nova'. Despite the significant fall in scooter and step-thru volumes in February, overall unit sales is higher by 11% to 108,901 units. This was partly led by increased demand for three-wheelers. For the first 11 months of the current fiscal year, Bajaj has posted a 9% rise in volumes, which of course is largely led by motorcycles. We had estimated total volumes sales of the company for FY03 at 1.5 m units, which is more or less in line with the performance till now.
The stock currently trades at Rs 510 implying a P/E multiple of 10x nine months earnings. Going forward, the company is expected to launch a world motorcycle, which will be sourced by Kawasaki for marketing in select export markets. This combined with a couple of new upgrades will aid topline growth in FY04. That said, growth is expected to taper down in the coming fiscal in light of challenging economic prospects. Poor monsoon in FY03 is likely to have an impact on demand. This combined with the additional duty imposed on two-wheeler manufacturers will result in higher prices. Though manufacturers expect to pass on the burden to the consumer, we are cautious on the realisation front.
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