Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Bajaj Auto: Will efforts pay off? - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Apr 17, 2001

    Bajaj Auto: Will efforts pay off?

    Bajaj Auto Ltd (BAL), a leading manufacturer of two wheelers has been faced with a couple of issues over the past year. The main being declining volumes in the scooter market coupled with the fact its margins have been hit in FY01E, due to higher costs related to its motorcycles division.

    In FY01, Bajaj Auto's market share in the geared scooter market was 73.3%. However its volumes in this segment declined to 435,667 scooters, a fall of 41% YoY. The company has two options in front of it for its scooter division. Either Bajaj Auto revives demand for this market or bids it adieu. The company has opted for the former. As a result the company has got aggressive and has come out with a stripped down version of its two-stroke scooter. On a month on month (MoM) basis, scooter segment has shown some improvement in volume terms. In March 2001, BAL sold 42,585 scooters as compared to 36,202 scooters in February 2001 and 33,889 scooters in January 2001. This MoM improvement is encouraging, however it is important to watch whether this trend continues over the next few months.

    The company has realised that it lost out to motorcycles partly due to its own pricing policy. The difference between its mid ranged scooter and its reasonably priced Boxer motorcycle was only Rs 6,000-7,000. Hence now with its focus on a variety of stripped down versions, which would be more inexpensive, it is targetting first time users who have never owned any kind of vehicle earlier.

    Though it seems that there would be a large market for scooters considering that this is a growing economy, the company's strategy on this front has yet to show the much desired results.

    On the other hand, the company is also concentrating on cutting costs across the board to increase its languishing margins. It is now in the process of developing certain parts for its motorcycles indigenously, rather than importing them. This will help the company improve its motorcycle margins.

    Besides the company has launched its new model "Eliminator" in the premium range of the motorcycle segment, so as to improve its margins from this segment.

    Volumes FY01 FY00 % change
    Scooters 435,667 739,916 -41%
    Sunny/Spirit 75,594 69,335 9%
    Step thrus 120,589 176,194 -32%
    Japanese Motorcycles 421,997 255,176 65%
    Three-Wheelers 155,170 171,977 -10%
    Total 1,209,017 1,412,598 -14%

    However its not certain that to what extent the company will succeed on this front too as in FY2002 the company is going to face higher competition in the motorcycle segment with the entry of other players like Kinetic and LML. Besides the threat of cheaper Chinese imports is also going to put pressure on price increases in this segment.

    Atleast BAL is making some efforts towards improving its volumes and revenues from both its divisions. The scooter volumes in FY01 accounted for 36% of BAL's total volumes, as compared to 35% contributed by its motorcycles. The fact remains that margins in the scooter segment are higher and could turnaround the fortunes of the company. However the one big questions mark remains. Will BAL succeed in reviving this dying market, considering that consumer preferences have shifted?

    On the current price of Rs 248, BAL is trading at 5.9x FY02E EPS of Rs 42.4.



    Equitymaster requests your view! Post a comment on "Bajaj Auto: Will efforts pay off?". Click here!


    More Views on News

    Tata Motors Ltd: Another Disappointing Quarter, Management fails to Perform! (Quarterly Results Update - Detailed)

    Aug 14, 2017

    Tata Motors Ltd disappoints again for both India and JLR business. Management commentary indicates a slow year ahead.

    Maruti Suzuki Ltd: Bumpy First Quarter. GST dents Margins! (Quarterly Results Update - Detailed)

    Aug 2, 2017

    GST realted cost impacts Margins, Management expects good year ahead.

    Hero Motocorp Ltd: Riding on the Scooters Growth, Maintains Margins! (Quarterly Results Update - Detailed)

    Aug 1, 2017

    Good Recovery in the Scooters market, expects pick up in exports too.

    Bajaj Auto Limited: Recovery in Exports but Domestic Disappoints! (Quarterly Results Update - Detailed)

    Aug 1, 2017

    New Export Markets picking up, Management expects good recovery in domestic Three wheeler market.

    Bajaj Auto Limited: Finishes the Year with Headwinds. Poised for a Recovery Ahead? (Quarterly Results Update - Detailed)

    Jul 6, 2017

    Ends the year on a Flat note. Expects good recovery in the exports market.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 17, 2017 12:00 PM


    • Track your investment in BAJAJ HOLDINGS & INVSTMENT with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks