Bajaj Auto 1QFY01: Operating profit dips 16.7% - Views on News from Equitymaster

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Bajaj Auto 1QFY01: Operating profit dips 16.7%

Jul 31, 2000

Bajaj Auto Ltd (BAL), India's largest two wheeler manufacturer has reported a net profit of Rs1,163 m for 1QFY01, an increase of 4.7% YoY. The company's sales grew by 15.9% YoY from Rs 8,003 m in the 1QFY00 to Rs 9,275 m in the 1QFY01. However due to higher expenses the company's operating profits fell by 16.7% YoY to Rs 986m in the 1QFY01.The company's other income grew by 19.4% YoY, to Rs 904m, and accounted for 62% of the company's profit before tax for the 1QFY01. This is higher as compared to 1QYF00, when other income accounted for 48% of the profit before tax. The higher other income in the 1QFY01 has helped in sprucing the company's net profit growth, which otherwise would have reported a fall. Operating margins have fallen to 10.6% YoY in the 1QFY01.

(Rs m)1QFY001QFY01Change
Sales 8,003 9,275 15.9%
Other Income 757 904 19.4%
Expenditure 6,819 8,289 21.6%
Operating Profit (EBDIT) 1,184 986 -16.7%
Operating Profit Margin (%)14.8%10.6%
Interest 5 11 119.6%
Depreciation 345 416 20.6%
Profit before Tax1,5911,463-8.0%
Other Adjustments--
Tax 480 300 -37.5%
Profit after Tax/(Loss) 1,111 1,163 4.7%
Net profit margin (%)13.9%12.5%
No. of Shares (eoy) (m) 119.4 119.4
Diluted number of shares 119.4 119.4
Diluted Earnings per share*37.239.0

The company's overall sales went up due to higher volumes in the 1QFY01 by 9% YoY. This was mainly due to higher Japanese motorcycles which helped in pushing up the company's volumes. BAL has decided to take advantage of this boom in the motorcycle segment and is stepping up its capacity to 0.84m units by July 2001. However, scooter sales continue to decline.

BAL's total volumes up 9% YoY in the 1QFY01
(no. of units sold)1QFY001QFY01% change
Scooters 169,134 143,300 -15.3%
Sunny/Spirit 11,004 19,562 77.8%
Step Thrus 34,295 37,779 10.2%
Japanese Motorcycles 45,646 85,274 86.8%
Three-wheelers 37,158 39,439 6.1%
Total 297,237 325,354 9.5%

The operating margins fell due to higher expenses on account of introduction of new models and higher marketing expenses. As motorcycles enjoy lower margins as compared to traditional scooters, this too has affected the company's margins.

The company has been bogged down with issues of stock market related activities resulting in higher other income and declining scooter volumes. It also needs to increase its spends on research and development. On the positive side they have become more aggressive on the stepping up new models in the fast growing motorcycle segment.

The company had recently announced its decision to buyback upto 15% of the company's equity capital. The company has now decided to bring down the buyback price to Rs 400 per share from the earlier Rs 450 per share. This has probably been done due to the dismal performance of the company's share price.

On the current price of Rs 354, BAL is trading at 6.9x FY2000 EPS of Rs 51.4.

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