Domestic demand drives Bajaj Auto's small profit growth; net up by 3%

Two-wheeler major Bajaj Auto on Wednesday posted a marginal rise of 3 per cent in consolidated net profit during Q3FY23 to Rs 1,473 crore, against Rs 1,430 crore a year ago. Though there was a decline in exports (that contribute to 50 per cent of its business), the rise in domestic volume helped the company to improve its numbers.

On a standalone basis, the company’s net profit was up 23 per cent to Rs 1,491 crore.

The Pune-based company’s total revenue from operations during the quarter also increased by 3 per cent to Rs 9,319 crore, against Rs 9,022 crore in Q3FY22. The company, which is the largest three-wheeler manufacturer in the country, also said that it may launch an electric three-wheeler by the end of March this year.

At Rs 1,777 crore, the company’s Ebitda was the highest ever, surpassing the record set in the previous quarter. “These numbers were posted in a very difficult quarter. Around 50 per cent of our business is from overseas markets and everyone is aware of the macroeconomic troubles of emerging markets, from Bangladesh to Africa to Latin America. We had to navigate through those issues,” said Rakesh Sharma, executive director, Bajaj Auto.

The company’s domestic business witnessed sustained double-digit revenue growth in both two-wheeler (2W) and three-wheeler (3W) segments. The 2W performance was buoyed particularly by strong festival season sales of 125 cc and above units, while the 3W volume surged, leading to its record high market share.

While in the 125 cc and above, the company’s business increased by 23 per cent, the entry-level segment was down by 5 per cent. According to the company, this indicates the recovery in the lower-income group segment is slow.

During the quarter under review, domestic commercial vehicles (CV) posted a 71 per cent rise in volume to 89,042 units, against 52,015 units last year. On the other hand, domestic 2W sales were down by 3 per cent to 455,146 units, taking total domestic sales volume to 5,44,188 units, up 4 per cent YoY. Total exports during the period was down by 33 per cent to 4,39,088 units, against 658,062 a year ago.

“Bajaj Auto reported healthy performance in Q3FY23 with ASP’s (average selling price) and margin surprising positively and was above our estimates on all fronts. Blended ASPs surprised positively for the quarter and stood at Rs 92,015 per unit, up 6.9 per cent QoQ. The margin beat was on account of higher-than-anticipated gross margin expansion, which stood at 280 bps QoQ against our estimate of 180 bps QoQ. Management informed about judicious pricing, better dollar realisation, and richer product mix aided margin performance,” said a report by ICICI Direct Research.

The company said that the Chetak electric vehicle business continues to steadily expand with volumes up fivefold over the previous year. The company said it is also set to come up with its electric three-wheeler soon. “As far as electric three-wheelers are concerned, we are almost at the end of our trials. The second round of trials will be over by the end of February or so. Customers are very appreciative of the proposition. Whatever the minor feedback is there, we will be able to incorporate by the end of February and will launch this product hopefully by the end of March selectively and then ramp it up,” he added.

He indicated that the overseas market is still ‘uncertain and choppy.’ “In South Asia, Africa, and Latam, demand has dropped 30 per cent. The reason for this is there has been serious devaluation in almost all emerging markets. That has led to an increase in retail prices. Since the availability of dollars is low, a lot of these countries have imposed a lot of restrictions on the availability of dollars for trading,” Sharma said.