X

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: Analyst meet update - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • May 9, 2001

    Bajaj Auto: Analyst meet update

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

    The main highlights of Bajaj Auto's analyst meet are:

    Financial details

    • The company's operating margins in FY01 declined by 700 basis points to 7.9% as compared to 14.9% in FY00. The main reasons for this is a 41% decline in volumes in the geared scooter market (which enjoys the highest margins) as well as higher costs in relation to marketing. Besides the company's pricing policy of its Boxer model in the motorcycle segment at a lower range has resulted in very low margins in this segment in FY01.

    • 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.

    • The company has incurred a one time expenditure on its voluntary retirement scheme. This cost the company Rs 800 m in FY01. 2,017 employees took the VRS during FY01. The company's total employee strength stands at 13,900 employees in FY01 as compared to 17,200 employees in FY00.

    • BAL's other income was lower in FY01, due to lower surplus funds available on hand due to its buyback in which the company spent Rs 7.3 bn. Besides the company's profit on sale of equity investments was lower at only Rs 250 m in FY01 as compared to Rs 1,430 m in FY00, due to unfavourable stock market conditions. The company's profitability in FY01 was affected by this lower other income. In FY00, other income accounted for 10% of total income as compared to only 6.6% in FY01.

      Other income break up (Rs m) FY00 FY01
      Dividends 380 340
      Interest- Debentures, Bonds, Govt. Securities 760 570
      Interest on ICDs & others 560 490
      Income from mutual funds 230 140
      Lease rent & lease equalisation 460 430
      Profit on sale of investments 1430 250
      Surplus on redemption on treasury bills 20 130
      Interest on fixed deposits - 50
      Others 210 240
      Total 4050 2640

    • The company's tax outgo during the year was lower due to tax incentives it received as a result of putting up its windmill plant for generating power and its VRS outgo. The company's effective tax rate reduced from 26% in FY00 to 7% in FY00.

      Volumes FY00 FY01 % change
      Geared scooters 739,916 435,667 -41.1%
      Ungeared scooters 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%

    Future Prospects:

    • BAL is optimistic on the motorcycle segment and sees the market growing at 15-20% in FY01. It expects its motorcycle volumes to surge by 40-50% in FY01, as a result of competitive pricing as well as new product introduction. The company through its cost cutting efforts has managed to reduce its cost per motorcycle by Rs 4,000. BAL's motorcycles are now profitable, in FY01 the company managed to just about break even in this segment. Hence its margins are likely to go up, even if the company does not increase prices of its vehicles. Besides the company will be introducing higher margin motorcycles like Pulsar and Acer during the current year in the 150 cc to 180 cc range. This too will help in improving the company's margins.

    • BAL is hoping to sell 50,000 motorbikes per month from October 2001 onwards, as compared to an average of 35,000 bikes per month in FY01.

    • Competition is expected to be higher in the motorcycle segment in the current year, but Bajaj is confident of increasing its market share due to its aggressive pricing policy in the 100 cc segment. In FY01, BAL's market share was 21%. It plans to launch its higher end bikes in the larger cities like Mumbai and other metros to increase its volumes and margins.

    • Bajaj Auto accounts for 40% of Kawasaki's worldwide sales. Though the company has tied up with Kawasaki for majority of its motorbikes, it does not plan to depend only on Kawasaki. It is making some bikes indigenously on its own. The 'Pulsar' to be launched in August 2001, is one such model.

    • In the geared scooter market the company has launched a stripped down version of its 'Chetak' model. They expect the scooter market to grow in the current year as they see demand in the states of UP, Punjab and Haryana picking up. In April 2001, BAL saw an improvement in the eastern states. This being mainly because many consumers still prefer scooters as an entry level vehicle.

    • BAL is not very positive on Step thrus segment and ungeared scooter segment and sees volumes in these segments decline in the current year.

    • In terms of margins, the company’s margins are lower in the ungeared scooter segment as compared to its competitors, Kinetic Honda and TVS Scooty. In geared scooters, BAL has the highest margins and is hence the most profitable player. In motorcycles now margins have improved and are likely to be better in the current year due to cost cutting. In three wheelers too margins are very high and it is a very profitable segment.

    Capex plans

    • In the company's windfarm operations, it has planned a total capacity of 59.2 MW at a cost of Rs 2.7 bn. Of this 39.2 MW has already been installed and the balance proposed 20 MW, costing Rs 970 m will be installed in the fourth phase which is in progress at Kovadaya Dongar in Ahmednagar district. After the completion of this 80% of the company's power requirements will be met through its own plants. This will result in some savings in terms of power costs to BAL (power costs accounted for 3% of total costs in FY00).

    • The company has tied up with Allianz AG for non life and life insurance business. The total capital for non life is slated to Rs 1.1 bn and Rs 1.5 bn for the life business. Of these two joint ventures, Bajaj will hold a 76% stake and Allianz the balance 24%. They have received R3 permission from IRDA for the non-life joint venture.

    BAL has been keen to export its three wheelers to China in the form of completely knocked down kits, as demand is promising for this segment in China. Hence, it is on the lookout for a partner in the Chinese market for the same. In return it plans to sell ungeared scooters for its Chinese counterpart as it is not very strong in this segment domestically.

    On the current price of Rs 232, BAL is trading at 6.6x FY02E EPS of Rs 35.1.

     

     

    Equitymaster requests your view! Post a comment on "Bajaj Auto: Analyst meet update". 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

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    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.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    More
    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

    BAJAJ HOLDINGS & INVSTMENT SHARE PRICE


    Aug 22, 2017 (Close)

    TRACK BAJAJ HOLDINGS & INVSTMENT

    • 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

    MARKET STATS