PremiumMotorcycle and three-wheeler maker Bajaj Auto Ltd reported a 20% jump in profit to ₹1,530 crore in the quarter ended 30 September, despite the setback it faces in major export markets, the company announced on Friday.
The Pune-based company saw all-around recovery in profits, margins, and revenues in the quarter on both a yearly and sequential basis. Revenues rose 16% year-on-year (y-o-y) in Q2FY23 to ₹10,203 crore, aided by a recovery in domestic motorcycle sales on the back of improving semi-conductor chip supplies, the highest ever in a quarter for the automaker.
A 27% y-o-y decline in high-margin two-wheeler export volumes in the quarter was offset by a 27% increase in domestic motorcycle sales for the same period. Overall two-wheeler volumes, however, declined 1% during this time.
However, the company expects exports to improve in Q3FY23 as the adjustment in stock for export markets that the company was undertaking has been completed in the last quarter, Dinesh Thapar, chief financial officer, Bajaj Auto, told analysts in a conference call. Going into the festive season, the company was expecting to only see a moderate single-digit growth in domestic two-wheeler sales, said Rakesh Sharma, executive director, Bajaj Auto. The Pulsar motorcycle has been a strong draw for customers, aiding domestic sales, Sharma said. Bajaj Auto saw a 26% y-o-y increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) margins for the quarter under consideration at ₹1,759 crore.
Caliberated product price hikes, increased realizations from favourable foreign exchange rates, and lower internal costs (employee and other expenses) propped up margins by more than a 100 basis points for the company, it said. One basis point is 0.01%.
“Our domestic volumes have nearly doubled over the previous quarter across two-and three-wheelers, which helped cushion the drop in deteriorating macroeconomic conditions in export markets," Bajaj Auto said. However, a strong show in some ASEAN markets, such as the Philippines, arrested the export slump to some extent, it said.
Bajaj Auto also highlighted that the chip shortage issue was almost completely resolved now, with further improvement expected in October. The company had a very high dependence on a single supplier, which impacted their supplies more than the industry. “On the sales front, the company has witnessed some setback in export markets due to a muted global outlook. Further, Bajaj Auto has recently closed a buyback of 64.1 lakh shares (about 2.2% of outstanding shares) from the open market utilising the intended ₹2,500 crore as buyback amount with average acquisition price derived as ~ ₹3,900 per share. The company’s product on the electric 3W space is still awaited. The key monitorables at Bajaj Auto would be demand outlook in the export market and further journey towards electrification," said a report by ICICI Direct Research.