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Bajaj Auto: Other income to the rescue - Views on News from Equitymaster
 
 
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  • Jul 30, 2001

    Bajaj Auto: Other income to the rescue

    Bajaj Auto Ltd (BAL), a leading two wheeler manufacturer has reported a net profit of Rs 1,208 m for 1QFY02 a growth of 4% YoY. However, the company's overall sales continued to fall on the back of a 4% decline in overall volumes during this period. The main segments which dipped are geared scooters, scooterettes, three wheelers and step thrus.

    (Rs m) 1QFY01 1QFY02 Change
    Sales 9,275 9,149 -1%
    Other Income 904 1,016 12%
    Expenditure 8,289 8,155 -2%
    Operating Profit (EBDIT) 986 994 1%
    Operating Profit Margin (%) 10.6% 10.9%  
    Interest 11 12 11%
    Depreciation 416 450 8%
    Profit before Tax 1,463 1,548 6%
    Extraordinary items - -  
    Tax 300 340 13%
    Profit after Tax/(Loss) 1,163 1,208 4%
    Net profit margin (%) 15.0% 5.5%  
    No. of Shares (eoy) (m) 119.4 101.2  
    Diluted number of shares 101.2 101.2  
    Diluted Earnings per share* 39.0 47.7  
    *(annualised)      

    The growth in profits can be attributed to a 12% growth in other income in 1QFY02 which includes Rs 450 m received by the company as premium from its overseas partner Allianz AG for non-life insurance business that the company has entered into. If it was not for this, the company's other income would have declined by 37% YoY to Rs 566 m and its net profit would have declined by 35% YoY for this quarter.

    On the cost fronts, the company has managed to curtail its staff costs by 3.9% due to its ongoing voluntary retirement scheme which started in FY01. It has also managed to reduce other expenses by 6.5% YoY during this quarter, due to its efforts to improve overall efficiency. The improvement in operating margins from 10.6% in 1QFY01 to 10.9% in 1QFY02 of 30 basis points, however is the result of savings in the form of windpower generated for captive comsumption to the tune of Rs 58.7 m in 1QFY02. Had it not been for this the company's operating margins would have declined.

    In the motorcycle segment, the company did better than the industry as its volumes for 1QFY02 grew by 40% YoY as compared to industry volumes which grew by 28% YoY during this period. As this segment continues to see a shift in consumer preference over scooters the company is making efforts to become a leading player in this segment. It currently has the 2nd highest market share. Its leading brand Boxer AT and Boxer CT have done well. In the premium range, the company has launched its 175 cc Eliminator in Mumbai, Bangalore, Ahmedabad and Bangalore during this quarter.

    Volumes 1QFY01 1QFY02 % change
    Scooters-geared 142,905 123,974 -13%
    Scooters-ungeared 19,962 15,665 -22%
    Step thrus 37,779 19,358 -49%
    Japanese Motorcycles 85,274 119,570 40%
    Three-Wheelers 39,440 34,780 -12%
    Total 325,360 313,347 -4%

    BAL's geared scooter volumes fell by 13% YoY in 1QFY02, this was marginally better than the industry which dipped by 14% YoY during this period. As a result the company's market share improved to 75.9% in 1QFY02. The company is going to launch a couple of 4 stroke scooters in the next few quarters so as to revive this segment. However, as of now volumes in this segment continue to decline.

    Market share 1QFY01 1QFY02
    Scooters-geared 74.6% 75.9%
    Scooters-ungeared 19.6% 16.2%
    Step thrus 61.8% 57.7%
    Japanese Motorcycles 18.7% 20.4%
    Three-Wheelers 76.6% 72.3%

    These results are slightly lower than market expectations on the operating level however the results have been better on the net profit level. On the current price of Rs 241, it is trading at 9.3x FY01 EPS of Rs 26.

     

     

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