Bajaj Auto faces turbulence in last quarter of FY 2012, witnesses 45 per cent in net profits

Friday 18 May 2012, 23:42 PM by

Net profits of domestic two wheeler major Bajaj Auto reduced by 45 per cent on Year-over-Year basis and amounted to Rs. 772 crores during Q4 of FY 2012. In the same quarter of the previous year, it had an additional pre-payment of sales tax deferral liability worth Rs. 827 crores. It saw a growth of 12 per cent to Rs. 759 crores in its profits after leaving out exceptional items. The 12 per cent YoY growth in total income (Rs. 4,651 crores) in January-March 2012 did not meet market expectations, although net profit fitted the bill.

On an average, trade analysts expected the company's quarterly net profits to be Rs. 770 crores on the revenue of Rs. 4,780 crores. With an EBITDA margin of 20.7 per cent in last quarter, the automobile giant had an EBITDA of Rs. 972 crores.

The two wheeler market was performing well in FY 2011-12 before hitting a bump in the fourth quarter. Sales of Bajaj Auto crossed 1 million vehicles for the fourth consecutive quarter. However, it marked an insignificant growth of 7 per cent by selling 10,17,167 units in Q4. With 2,80,732 motorcycles exported last year, the company showed growth of 28 per cent in bike exports during January-March 2012. However, the sales in the country witnessed a downward slope with number of bikes sold coming down to 6,16,516 units as compared to 6,17,255 units last year. Bajaj Auto sold 1,19,919 Commercial Vehicles (CVs) in the last quarter of FY 2012 to mark growth of 8 per cent. CV sales in domestic circuit went down 3 per cent, while exports witnessed an 18 per cent growth.

Rajiv Bajaj, Managing Director (MD), Bajaj Auto, is optimistic about reaching the sales target of 50 lac units in FY 2012 even though the domestic market continues to be slow. He is relying on the company's new offerings, namely Pulsar 200 NS and Discover 125 ST, to maintain a steady sales flow. Pulsar 200 NS is a premium product by the company, priced just under Rs. 1 lac and will roll out to showrooms next week in Maharashtra. The bike will be available in other cities across the country by July 2012 and exports will start the following month.

The company had showcased its first offering in the four wheeler segment, RE60 in January 2012. According to Bajaj Auto, the final tests are going on and the car will be launched by the end of this fiscal.

Surplus cash and cash equivalent of the company stood at Rs. 5,451 crores on 31st March 2012. Owing to low sales volumes, the company's shares came down 1.2 per cent to settle down at Rs. 1,595. However, trade analysts are hopeful that Bajaj Auto will make a comeback owing to the new launches in the pipeline and increase in the exports.

An auto analyst at Marwadi Shares and Finance Ltd. (MSFL), Ronak Sarda said, "Though there has been near term concerns on slowing urban demand we believe the segment will be first to catch up as sentimental factors improve. We like Bajaj Auto due to higher exposure to exports and launch of new vehicles on the horizon which will drive future volume growth."

Exports of 36 per cent contributed to the overall sales of Bajaj Auto. There were no exports to Sri Lanka this month as the country increased its import duty by a large margin. Rajiv Bajaj is, however, hopeful that the company will commence exports to the nation from next month.

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