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Bajaj Auto announces Q1 results!

Bajaj Auto announces Q1 results!

Last updated: 23 Jul, 2020 | 08:04 am

Bajaj Auto announces Q1 results!

Significant drop in profit: Bajaj Auto has reported a significant decline in net profit in Q1FY21, mainly impacted by the lockdown imposed on March 24th. Net profit of the two-wheeler maker fell 53% on-year to Rs 528 crore, in-line with estimates. 

Revenue declines: Revenue from operations fell 60.3% on-year to Rs 3,079.24. The company sold 0 units in the month of April. Q1 FY21 has been an extremely challenging quarter due to the unprecedented COVID-19 pandemic. Lockdown and other containment / precautionary measures have resulted in disrupted supply lines and a sharp decline in overall demand, Bajaj Auto said. EBITDA declined 65% on-year to Rs 441 crore. Ebitda margin contracted to 14.3% from 16.1% last year.

Faster recovery than industry in 2-wheelers: “Bajaj Auto’s market share in the domestic motorcycle market increased to 20.7% as at the end of June, as sales recovered faster than the industry.” “{{tweet1}}. The table below compares Bajaj Auto’s sales in the Domestic Motorcycle segment with the industry.

Commercial vehicles (3-wheelers, Carriers) severely affected: Domestic market of commercial vehicles was severely impacted due to lack of commuting demand amid the pandemic. The industry recorded a decline of 91% and being a market leader, Bajaj Auto was impacted the most.

The numbers in Q1FY21 were expected to be weak for the auto industry, as the lockdown had stalled operations. However, Bajaj Auto has reported a decent set of numbers, given the circumstances. Further, the company is seeing a faster recovery than the industry in the domestic two-wheeler segment, owing to strong pent-up demand from rural areas. Going forward, two-wheeler sales should recover as consumers look to avoid public transport and prefer to have their own vehicles to better practise social distancing.

Apart from its domestic business, Bajaj Auto also has a significant contribution from exports business (~48% of turnover). In fact, Bajaj Auto has exported a higher number of 2-wheelers and 3-wheelers as compared to its domestic sales. The focus on premiumisation and better realisation through exports will be major positives going forward.

Our VGQM model has a BUY rating on the stock.

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