Though the two wheeler market of India witnessed decent growth in major portion of 2011-12, it recently hit a few roadblocks. The competition in the sector has intensified since Honda Motorcycle and Scooter India (HMSI) adopted aggressive strategies after parting ways with Hero MotoCorp. This raises many questions over the present market scenario as well as its future prospects. The answers to these questions may lie in the earnings of second biggest two wheeler manufacturer of India Bajaj Auto, which will be announced on May 17, 2012.
Analysts are anticipating a Year-over-Year (YoY) growth of 13 to 20 per cent in net profits of the company, whereas a 13 to 17 per cent increase has been predicted for net sales. On the other hand, a 4 to 8 per cent decrease in net profit and 4 to 7 per cent slump in net sales have been projected for Bajaj Auto on sequential basis.
The leader of the two wheeler segment in the country, Hero MotoCorp announced a 20 per cent hike in net profits on YoY basis in the last quarter of the previous fiscal. Sales of the company in this period went up to Rs. 604 crores primarily because it recorded its highest ever sales in the Jan-March 2012 quarter. Its total turnover in the same quarter rose by 12 per in comparison with the corresponding period and amounted to Rs. 6,035 crores.
Karan Mittal and Nishant Vass, ICICI Direct.com, stated, "Bajaj has been facing increasing competitive heat in the domestic market. Q4 volumes have been tepid at 1.02 million units, lower than revised management estimates of 1.07 million."
Bajaj Auto rolled out a total of 8.97 lac motorcycles between January and March 2012, a growth of 7.2 per cent over the same quarter of 2011. However, this also translated to a 5.2 per cent decrease in sales on per quarter basis. According to Standard Chartered, sales of three wheelers sold by the company stood at 1.2 lac units, a growth of 7.5 per cent in comparison to Jan-March 2011 quarter, though this also means a 7 per cent sequential decrease. Bajaj also saw the total exports go down in the period as it shipped 9 per cent lesser vehicles compared to the preceding three months, even though this also translated to a 26 per cent rise on YoY basis. The profit margins of the manufacturer have also been in the line of fire owing to lower realisations.
As per Standard Chartered's Amit Kasat and Aniket Mhatre, "We have assumed a quarter-on-quarter decline in average realisation as we believe that discounts would have increased in fourth quarter in a bid to push volumes in the domestic market." While most analysts believe that its YoY EBIDTA margins will remain equal to that of last year, Jinesh Gandhi and Mansi Varma of Motilal Oswal have forecasted a 40 basis point increase in margins on YoY basis and no rise on sequential basis.
Bajaj Auto's sales may rise this year as it has presented two new bikes (Pulsar 200 NS and Discover 125 ST) and will also distribute KTM Duke. It will also launch its first four wheeler, called RE 60, in 2012, which is also expected to propel sales volumes. On May 17, 2012, shares of the company stood at Rs. 1574.35, a decline of 2.61 per cent on the BSE, whereas valuation of its stock on NSE went down by 2.42 per cent and settled at Rs. 1575.35 ahead of the declaration of its earnings in Q4 of last fiscal.
