What to expect from Bajaj Auto Q1 earnings
India's second largest two-wheeler maker Bajaj Auto is expected to report a flat earnings growth in first quarter as two-wheeler companies battle a slowdown in domestic sales and export markets like Sri Lanka.
July 18, 2012 / 10:54 IST
Moneycontrol Bureau
India's second largest two-wheeler maker Bajaj Auto is expected to report a flat earnings growth in first quarter as two-wheeler companies battle a slowdown in domestic sales and export markets like Sri Lanka. According to a poll by CNBC-TV18, Bajaj Auto will report a net profit of Rs 712 crore, little changed from a profit of Rs 711 crore in the year ago quarter. Revenue is seen up 0.7% at Rs 4,811 crore. Brokerages ICICI Direct and MSFL, infact, have forecast a 0.4% and 7% decline in net profit for the Pune-based company."Bajaj has witnessed a forgettable quarter with pressures/constraints from domestic as well as exports markets. Q1 volumes were weak at 1.07 million units, flat YoY, but the high margin three-wheeler business has declined 26% YoY," according to Nishant Vass and Venil Shah of ICICI Direct.com.In April-June, Bajaj Auto sold 10,78,971 units, down 1% from a year ago. While motorcycle sales rose 2% to 9,82,623 units, three-wheeler commercial vehicle sales slumped 26% to 96,348 units. Its exports were down 3% to 4,15,645 units.Bajaj Auto, stopped making scooters in 2010, a segment, which continues to see over 30% sales growth. It is also a market leader in the premium/sports bikes (Pulsar), where sales have been particularly slow.The company typically exports 10,000 motorcycles and three-wheelers to Sri Lanka each month. However, that has taken a huge hit after the government there hiked import duties sharply from April. The distributor there stopped imports to clear out existing inventory in April and May. Rajiv Bajaj, the company's MD, has said on several occassions that exports to Sri Lanka are likely to stabilise from July."Lower than expected three-wheeler sales will lower margins by 80bps, however partially offset by the rupee depreciation. Further with rupee ending at lower levels than last quarter, we will see notional losses on forex derivatives, which will restrict growth at PAT levels," said Raunak Sarda of Institutional Business Group, MSFL.The company's operating profit margins will be around 19.5% for April-June, up from a year-ago, but down 50-70bps sequentially, analysts say.An adverse product mix and higher spends to advertise and promote new products launched in the market will put pressure on margins.KEY THINGS TO WATCH:- Overall demand scenario in the domestic and export markets and the outlook for rest of the year
- Sales of the new Pulsar 200 NS and Discover ST launched in last couple of months
- Raw material costs
- Foreign Exchange derivatives -- MSFL's Sarda expects a notional loss
- Margins in the quarter and expectations going aheadSTOCK TALKBajaj Auto shares ended down 2.8% at Rs 1,445.05 on NSE on Tuesday. The stock is down 10.5% since it announced results on May 17, sharply underperforming the wider Nifty index, which has gained 7% over the same period. Emkay Global Financial Services and MSFL advise investors "buy" Bajaj Auto, with a target price of Rs 1,920 and Rs 1,846 respectively.
Angel Broking has an "accumulate" rating with a target of Rs 1,725 and Kotak recommends "add" with a target of Rs 1,675. ICICI Direct has a "hold" rating on the stock. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
