May 7, 2001|
Bajaj Auto: Margins to drive down FY01 net
Bajaj Auto (BAL), India's largest two wheeler manufacturer will be reporting its FY01 results today. We are expecting a net profit of Rs 2.7 bn for FY01E, a decline of 55% YoY. BAL has reported an overall volume drop of 14.4% for FY01 at 1,209,017 vehicles.
For the first nine months of FY01, the company's net declined by 47% YoY to Rs 1,986 m on the back of a volume drop of 9%. However growth in average realisations was 5% YoY. Its operating margins during this period fell to 7.5%, a decline of 740 basis points.
During 4QFY01, the company's volumes have declined by a sharp 30% due to an overall slowdown during these months for the two wheeler segment. As a result for 4QFY01, we expect Bajaj's net profit to decline by 68% YoY to Rs 748 m.
For FY01, we expect Bajaj's operating margins to decline from 12.5% in FY00 to 7.5% in FY01 as a result of lower volumes, higher marketing costs, the company's strategy of offering discounts as well as change in its product mix in favour of motorcycles. As margins in motorcycles are lower than scooters due to higher product costs as well as higher competition in the motorcycle segment, this shift is likely to have an adverse impact on the company's margins.
In FY01, Japanese and Indian motorcycles accounted for 45% of total volumes as compared to 31% in FY00. On the other hand scooters accounted for 52% of volumes in FY00, their share in FY01 came down to 36% in FY01.
On the current price of Rs 232, BAL is trading at 6.6xFY02E EPS of Rs 35.1.
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