Though Bajaj Auto has indicated lower two-wheeler industry growth than earlier projected for FY13, analysts bet on company’s growth and expects it to sustain better margins due to its well-diversified portfolio and success of the new launches.
Country’s third-largest two-wheeler firm by volumes has scaled down industry sales growth guidance for the current financial year to three-four per cent from seven-eight per cent earlier estimated and the company expects to grow in that range. The festival season so far has been flat to marginally positive, the management told the conference call while discussing its September quarter performance.
The company has indicated that its recently launched Discover 125 ST and Pulsar 200NS have been doing well and are clocking monthly sales of about 34,000 units and about 8,000 units, respectively. These two bikes are seeing increasing demand during the festive season and have led to incremental volumes in the last quarter, thereby boosting market share. While the company is planning to launch a new 100cc motorcycle during December -January period, it hopes to garner a market share of about 30 per cent by FY13-end driven by success of these variants. It had a market share of 24.7 per cent in the July-September quarter.
“This portfolio of new launches along with the existing bikes will help Bajaj to take on the competition coming from Honda, which is growing leaps and bounds,” said Ashwin Patil of LKP Securities.
“Given the expectation of revival in demand through new launches in a weak domestic environment and gaining strength in Africa, SE Asia and Latin America, we expect the worst for Bajaj Auto is behind them now. With second half expected to do better along with pan India launch of Pulsar 200NS and new launch of a 100cc motorcycle during in Dec-Jan, we expect motorcycles to do well going forward and show a good recovery, especially in FY14. With RE60 getting launched in a quarter, three-wheeler exports may get a fillip. With price hikes taken, raw material prices softening a bit and three-wheeler sales in exports improving, we see better margins in the ensuing quarters,” he added.
“While the short-term volume outlook remains challenging, changing competitive structure poses a risk in the long term. However, Bajaj Auto is relatively better placed due to its diversified portfolio, with just about 30 per cent of volumes coming from sale of above 125cc motorcycles in the domestic market. Successful ramp-up of recent motorcycle launches and opening-up of three-wheeler permits would be key drivers for the stock over the next six-nine months. We estimate Ebitda margin at 18.1 per cent for FY13,” said Jinesh Gandhi of Motilal Oswal Securities.
Angel Broking’s Yaresh Kothari expects the volume growth of the company to revive in H2FY13E driven by recovery in export volumes (post price rationalisation in Sri Lanka) and also due to the success of new launches (Pulsar 200NS and Discover 125ST). The ebitda margin is expected at a little over 18 per cent for FY13.
Echoing similar view, Surjit Arora of Prabhudas Lilladher said, “With about 45 per cent of the revenues coming from relatively stable export and three-wheeler business, we believe 19 per cent plus ebitda level margins are sustainable. In our view, margins are likely to improve from here on (mainly H2FY13), led by better product mix in favour of high-end motorcycles and three-wheelers.
