Budget 2020

Green shoots visible in Bajaj Auto’s Q2 show: Key takeaways

NEW DELHI: The negative impact of the pandemic was visible in Bajaj Auto’s September quarter earnings performance but so were the green shoots as some of the segments recorded record sales during the quarter.

The company blamed lower interest rates during the second quarter, which resulted in reduction of treasury income. The company also said its Ebitda and margin were impacted due to a government order that restricted Merchandise Exports from India Scheme benefit on exports to just Rs 2 crore. This resulted in reversal of Rs 78 crore for the first quarter.

A dormant commercial vehicle segment too remained a drag on its earnings but the company believes that the ongoing festive season will also bring more good news for the company as there are indications of a strong recovery.

Here are key takeaways from Q2 show of Bajaj Auto:

How much did the company earn?
Bajaj Auto said its net profit dropped nearly 19 per cent year-on-year (YoY) to Rs 1,138 crore. Sales declined 7.16 per cent YoY to Rs 7,155.86 crore. Operating profit of the company inched lower by 1 per cent to Rs 1,233 crore.

How did its flagship bikes perform?
The company said it sold 348,561 units of its flagship Pulsar during the quarter, which was the highest ever. Similarly, its high end collaborations KTM and Husqvarna also performed brilliantly, as the company sold 20,200 units of them, highest ever in a quarter in the domestic market.

What is the growth chart in the two-wheelers segment?
The company reported a 6 per cent YoY growth in domestic two-wheeler volume but the exports fell by 11 per cent. Overall, the volume was down about 2 per cent.

“Domestic two-wheelers registered a strong turnaround in the first half of the quarter driven by pent up demand. While the exact festive spike is awaited, early signs show (strong) indications of a recovery,” said Bajaj Auto.

The two-wheeler industry grew by 7 per cent in Q2 and our growth was in line with industry and hence the market share was 18.2 per cent in H1FY21 vs 18.1 per cent in H1FY20, it added.

Is there any recovery in the commercial vehicle (CV) segment?
Domestic CV volumes continue to remain muted and are dependent on return of adequate short distance mobility demand, the company said. Overall, the CV volume plunged by 53 per cent 88,872 units during the quarter.

“Within CV, cargo has fared better than passenger and our share has increased to 37 per cent which is the highest ever. Overall, our market share was 53.3 per cent,” the company said.

What is the situation of export volume?
Export continues to perform very well, and September saw the highest ever monthly sales at 2,12,000 units, the company said. However, for the whole quarter, the exports fell by 12 per cent YoY.

“Strong revival of demand was witnessed in Latin America and Africa while ASEAN continues to be weak and Sri Lanka has stopped all vehicle imports. The growth in LA TAM is driven by the Sports segment – Pulsar and Dominar,” Soumen Ray, CFO, Bajaj Auto said.

What is the cash position of the company?
The company managed to strengthen its cash position during the quarter. As of September 2020, surplus cash and cash equivalents with the automaker stood at Rs 16,240 crore as against Rs 14,232 crore in the previous quarter and Rs 14,322 crore as on March 2020.