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Bajaj Auto: FY03 volume numbers

Apr 8, 2003

FY03 has been a eventful year for Bajaj Auto. The company has been riding on the back of success of its models like 'Pulsar' and 'Boxer AR'. In the process, it has gained market share in a otherwise competitive motorcycle segment. Total volumes for FY03, inclusive of motorcycles, geared/ungeared scooters, step-thrus and three wheelers, have risen by 6% to 1.4 m units. While the volume growth of the motorcycle segment was in line with our estimates (actual growth of 32% as against our projections of 30%), the company has under performed on the geared/ungeared scooters front. The shift in preference away from geared scooter continued in FY03 thus resulting in a 35% decline in full year unit sales. We expect the company to have lost market share in the ungeared scooter market due to lack of competitive models (down 9% YoY). Both LML and Honda Motorcycles have strengthened their foothold in FY03 after the launch of 'Nova' and 'Dio' respectively. That said, Bajaj Auto's 'Spirit', the ungeared scooter, commands around 25% market share in the below 100 cc category.

Volume snapshot
(Nos) 1QFY03 2QFY03 3QFY03 4QFY03 FY03 % change*
Motorcycles 216,376 196,319 229,243 221,575 863,513 31.7%
Scooters-Geared 85,420 67,563 62,635 51,119 266,737 -34.6%
Scooters-Ungeared 13,138 19,444 19,143 8,600 60,325 -9.3%
Step thrus 13,832 14,597 14,644 10,032 53,105 -21.9%
Three wheelers 43,604 50,598 51,724 50,068 195,994 22.1%
Total 372,370 348,521 377,389 341,394 1,439,674 6.0%
(*FY03 over FY02) (Source: Bajaj Auto website)

On the motorcycles segment front, 'Boxer' has performed well and has extended its market share to 45% of entry-level market, which is estimated at 102,000 units (35% of total motorcycle sales). But growth was primarily led by 'Pulsar', the premium-end motorcycle. As against the company's estimate of 10,000 units per month at the beginning of the fiscal year, the model notched around 17,000 units per month in 3QFY03. Encouraged by the same, Bajaj was planning to ramp up sales to 25,000 units per month by March 2003. Following the launch of 'Caliber 115', the executive segment motorcycle' in February 2003, the company has steadied its presence in this market (accounted for 56% of industry sales in FY02). The new model has registered unit sales of 25,706 units for March 2003 (35% of March motorcycle sales).

FY03 also saw a sharp rise in three-wheeler demand. For the first nine months of FY03, the market grew by 23% YoY. While Bajaj has been dominating the passenger carrier market, moving trucking terminals out of city area is expected to translate into increased demand for goods carrier. Consequently, Bajaj has commenced the commercial production of the goods carrier and the company hopes to produce 500 units per month in FY04.

The stock currently trades at Rs 507 implying a P/E multiple of 10x FY03E earnings. Bajaj Auto has targeted an overall volume growth of 10% plus in FY04. While we have assumed around 7% rise in unit sales in FY04, this is without factoring in the contribution from exports resulting out of the new world bike for Kawasaki. The bike is slated for launch in 1QFY04 and it remains to be seen how things shape on this front. While we remain positive on Bajaj Auto's long-term growth prospects, realisation growth in FY04 has come under cloud in light of an highly competitive two-wheeler sector. The expected slowdown in the economy in light of poor agricultural sector performance in FY03 could also impact demand. As apparent from the chart above, YoY growth in monthly volumes has been on the decline in FY03 (to put things in perspective, motorcycle volumes in 4QFY03 grew only by 13% in 4QFY03 as against 21% and 29% in 3QFY03 and 2QFY03 respectively).

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