Bajaj Auto’s Q4 EBITDA Down 4.22%

Bajaj Auto (BAL) announced its Q4FY13 results on May 16, 2013. The company has been seeing significant pressure on sales in the last few months. In line with this, the results of BAL have been disappointing.

In Q4FY13, BAL’s motorcycle sales declined by 4.19%, as compared to Q4FY12. This was majorly due to domestic sales which declined by 9.79% over Q4FY12. Exports remained strong, having grown by 8.12% in Q4FY13. However, since 65% of BAL’s motorcycle sales are domestic, overall motorcycle sales declined by 4.19%. In Q4FY13, commercial vehicles sales grew by 1.36% YoY.

In Q4FY13, revenues of BAL increased by 4.15% to Rs 4990 crore as compared to Q4FY12. Although the company saw moderate revenue growth despite volume decline, there was significant pressure on the margins. Its EBITDA declined by 4.22% to Rs 931 crore and its net profit by 0.78% to Rs 766 crore. This translates into a decline in EBITDA margin and net profit margin of 163 basis points and 76 basis points.

Although the situation in the two-wheeler industry has been immensely pressured, we are bullish on the prospects of BAL. The overall situation is expected to improve with some easing in fuel prices and with some downward movement on the interest rate front. This would improve the situation for BAL.

Another factor affecting the sales of major listed players in the two-wheeler industry is competition. Intense competition by players like Honda has been reducing the market share of established listed entities. Considering the product portfolio of BAL, its target audience and the growth rate in these segments, the prospects of BAL definitely look brighter than those of Hero MotoCorp or TVS Motor.