Costing Effectiveness Saves The Day For Bajaj Auto

Bajaj Auto reported a decent performance for Q3FY14. The Company has posted its highest ever quarterly PBT and PAT, which stood at Rs 1311 crore (+12% on a YoY basis) and Rs 905 crore (+11% on a YoY basis) respectively. On the export front too, it witnessed significant gains. Its total export income at Rs 2123 crore was up 23.50% on a YoY basis.

In spite of a marked increase in the input cost including that of steel, aluminium and other imported components, the company has been able to contain its raw material cost as a percentage of sales to 66.38% witnessing a decline of 113 basis points.

It has been able to maintain its margins and growth as far as profitability is concerned. For the quarter under review, the company has posted an EBITDA margin of 21.1%, the best in the industry, witnessing a gain of 130 basis points. The EBITDA stood at Rs 1092 crore as against Rs 1085 crore reported in Q3FY13.

Better cost rationalisation and export revenues have helped the company to post better profitability and margins for the quarter. However, the domestic sales have played a dampener as the topline of the company came in at Rs 5353 crore for Q3FY14 as against Rs 5616 crore reported during the same quarter last year witnessing a decline of 5% on YoY basis. The sales in the month of November and December on the domestic front had remained sluggish for the company and hence the topline has suffered a decline.

The stock traded flat following the results. We suggest investors tread carefully in the stock as the monthly sales numbers on the domestic front are not that encouraging.