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Bajaj Auto: Making up for lost ground

Aug 8, 2000

Bajaj Auto Ltd (BAL) volumes for July 2000 have reported a robust growth in motorcycle sales. For the month of July 2000 the company has sold 32,696 Japanese motorcycles a growth of 118% YoY. For the period of April to July 2000 motorcycle sales stood at 117,970 units a growth of 95% YoY. As scooters seem to have run out of steam as compared to motorcycles, the company has decided to take advantage of this boom in the motorcycle segment and is stepping up its capacity to 0.84 m units by July 2001.

The company's Japanese motorcycles have been doing very well and the company has planned a couple of new product launches in this segment. Considering the company has recently entered the motorcycle segment, its products have been well received. The company's market share in motorcycles has been going up and for the period April-July 2000 was 19.5% YoY.

  July'2000 July'99 % change
Scooters 34,298 53,188 -35.5%
Sunny/Spirit 7,126 6,492 9.8%
Step Thrus 9,254 10,502 -11.9%
Japanese Motorcycles 32,696 14,998 118.0%
Three-wheelers 15,904 15,344 3.6%
Total 99,278 100,524 -1.2%

Motorcycles has helped the company in sprucing up its total volumes. For the period April-July 2000, inspite of a 20% drop in scooter sales, overall two wheeler sales grew by 7% to 424,632 units. This was mainly due to growth in motorcycle and scooterette segments at 95%YoY and 53% YoY respectively.

  April-July 2000 April-July 99 % change YoY
Scooters 177,598 222,322 -20.1%
Sunny/Spirit 26,688 17,496 52.5%
Step Thrus 47,033 44,797 5.0%
Japanese Motorcycles 117,970 60,644 94.5%
Three-wheelers 55,343 52,502 5.4%
Total 424,632 397,761 6.8%

For BAL, however as the margins in the motorcycle and scooterette segment are lower than traditional scooters and in future a large chunk of the sales mix will be contributed by these two segments, this would put pressure on the company's margins in the current financial year.

On the positive side the company is stepping up its production capacity for motorcycles and the company has decided to use a portion of its surplus funds for buy back of shares. On the negative side BAL is still sitting on a huge surplus of funds. It could put this to use by increasing dividend payouts, and increasing spends on research and development.

On the current price of Rs 356 , BAL is trading at 6.9 x on its FY2000 EPS of Rs 51.4.

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