Bajaj Auto: FY01 net down 57% YoY - Views on News from Equitymaster

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Bajaj Auto: FY01 net down 57% YoY

May 7, 2001

Bajaj Auto Limited (BAL) has posted a 57% YoY decline in net profit to Rs 2,626 m in FY01 (Rs 6,137 m in FY00). The company's gross sales declined by 3% YoY to Rs 36,900 m on the back of a 14.4% drop in volumes during the year.

(Rs m) 4QFY00 4QFY01 Change FY00 FY01 Change
Sales 10,954 8,781 -20% 38,100 36,900 -3.1%
Other Income 1,624 547 -66% 4,050 2,639 -34.8%
Expenditure 9,311 7,999 -14% 32,409 33,997 4.9%
Operating Profit (EBDIT) 1,643 782 -52% 5,691 2,903 -49.0%
Operating Profit Margin (%) 15.0% 8.9%   14.9% 7.9%  
Interest 25 23 -8% 41 74 80.5%
Depreciation 387 461 19% 1,453 1,773 22.0%
Profit before Tax 2,853 845 -70% 8,244 3,696 -55.2%
Other Adjustments 8 263   8 799  
Tax 495 -60 -112% 2,115 270 -87.2%
Profit after Tax/(Loss) 2,366 641 -73% 6,137 2,626 -57.2%
Net profit margin (%) 15.0% 5.5%   16.1% 7.1%  
No. of Shares (eoy) (m) 119.4 101.4   119.4 101.4  
Diluted number of shares 101.4 101.4   101.4 101.4  
Diluted Earnings per share* 79.3 25.3   51.4 25.9  
*(annualised)            

The fall in profits during FY01 is mainly attributable to the overall shrinkage of the geared scooter market, which registered a fall of 41% YoY from 739,916 units in FY00 to 436,667 units in FY01. The company being the market leader in this segment, has thus faced tough times. As margins are high in this segment, the company's margins were under pressure due to declining volumes here.

Volumes FY00 FY01 % change
Scooters 739,916 435,667 -41.1%
Sunny/Spirit 69,335 75,594 9.0%
Step thrus 176,194 120,589 -31.6%
Japanese Motorcycles 255,176 421,997 65.4%
Three-Wheelers 171,977 155,170 -9.8%
Total 1,412,598 1,209,017 -14.4%

On the other hand the company's volumes in the motorcycle segment grew by 65% YoY in FY01. The margins however were lower in this segment as a result of competition, higher marketing costs and the product pricing strategy of its motorcycle the 'Boxer'.

The company has managed to garner a 21% market share in the motorcycle segment. It plans to continue to be aggressive in this area and is planning launches in this segment in the 100 cc - 175 cc in the current financial year.

In 4QFY01, the company's sales fell by a sharp 20% YoY as a result of a 31% drop in volumes during this period, due to a slowdown in the two wheeler segment. The fall in operating profits would have been higher during this period had it not been for cost cutting efforts in the motorcycle division as well as lower discounts offered on its products in this quarter as compared to the earlier quarters.

Volumes 4QFY00 4QFY01 % change
Scooters 205,970 96,692 -53.1%
Sunny/Spirit 16,598 23,966 44.4%
Step thrus 51,373 23,140 -55.0%
Japanese Motorcycles 88,646 107,356 21.1%
Three-Wheelers 44,466 31,868 -28.3%
Total 407,053 283,022 -30.5%

The company's other income during the year declined by 35% YoY as a result of lower surplus funds available with the company after its buyback in October 2000. Besides, the company had clocked in Rs 1,430 m as profit on sale of investments in FY00 as compared to only Rs 250 m in FY01, due to unfavourable stock market conditions. This added to the decline in BAL's other income in FY01.

The company's tax outgo went down substantially in FY01, as a result of its windmills for captive power consumption which has resulted in sales tax and income tax benefits. Luckily for this, otherwise the drop in net profit would have been higher in FY01.

The company has incurred a one time expense for its voluntary retirement scheme to the tune of Rs 800 m. During the year 2,017 employees opted for the scheme. The company's total employee strength stood at around 13,900 in FY01 as compared to 17,200 in FY00.

The Board of Directors of the company has recommended a dividend of 80% for the year ended March 31, 2001. After adjusting for prior period items the net profit for FY01 stands at Rs 2.5 bn (down 61% YoY).

On the current price of Rs 230, BAL is trading at 6.6x FY02E EPS of Rs 35.1. We maintain our net profit at Rs 3,548 m for FY02E.


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