Bajaj Auto Limited (BJAUT) reported marginally better than expected numbers for Q4FY18. Standalone revenue was up 38% yoy at Rs6,773cr, better than consensus estimate of Rs6,650cr. Revenue was led by 4% yoy realization growth and 33% yoy volume growth. EBITDA was up 45% yoy at Rs1,315cr, while EBITDA margin expanded 92bps yoy to 19.4%. EBITDA was better than consensus estimate of Rs1,297cr. Input cost inflation continued to bite the company, leading to a 155bps yoy decline in Gross Profit margin to 30.7%. However, EBITDA margin improved, led by lower (as % of sales) operating and employee expenses. PAT was 35% yoy higher at Rs1,080cr.
The Board of Directors recommended dividend of Rs60 per share.
The standalone revenue of Rs6,773cr reported in Q4FY18 was the highest ever top-line in any quarter. Realizations have shown a sequentially rising trend since Q1FY18. It was heartening to see realization cross the Rs64,000 per unit mark this quarter.
Healthy EBITDA growth during Q4FY18 was a result of a better product mix. CVs (3Ws) essentially command better margins than other categories. The proportion of this sub-segment was up in the quarter. CVs constituted 18% of total volumes in Q4FY18 versus 11% in Q4FY17.
Domestic 3W volume growth has been extremely healthy over the past three quarters i.e. 14% yoy in Q2FY18, 105% yoy in Q3FY18 and 144% yoy in Q4FY18. This is due to opening up of permits in Maharashtra. The spill-over effect of opening up of 3W permits will be seen in Q1FY19, beyond which the effect is expected to taper off.
Secondly, export growth has been healthy for BJAUT over the past two quarters i.e. 255 yoy in Q3FY18 and 31% yoy in Q4FY18. Growth was led by strength in Nigeria. Rising crude oil prices have led to strong growth in oil-oriented export markets that BJAUT caters to.
Among its motorcycles, CT and Platina models continued to do well during the quarter, while the recently launched Pulsar has shown good traction.
Depreciation of INR vs. UDS augurs well for BJAUT since exports contribute more than 35% to BJAUT’s revenues for FY18.
Similar to that done by TVS Motor, the management of BJAUT also refrained from giving any kind of guidance for the next year (FY19) citing concerns such as volatile macro-economic conditions.
Highlights from post-result conference call
Guidance: Management has guided for 1,900,000 export volumes in FY19, growth of approximately 14-15%. Growth will be led by Nigeria. Motorcycle volumes expected to grow 10-11% in FY19.
Pricing scenario: Company took minor price correction in CT (Rs3,500 per unit), in which demand is currently outstripping supply. No 3W price hike taken in Q4FY18. One came on April 1, 2018, another one on May 14, 2018. Both were 1%.
Distribution and network: BJAUT currently has 650 dealers and 4,000 touch-points. Company seeing attrition of 14-15 dealers every year. Dealer margins are fixed at 4.5% of acquisition cost.
Capex guidance: Guidance of Rs250-300cr in FY19. Capacity is currently 6,600,000 for motorcycles and 7,20,000 for 3Ws.
Three Wheelers: Three wheeler demand boosted by Mumbai permit, rest of Maharashtra still has lot of potential. Diesel 3W market share is currently 35%, company expects to emerge market leader by year end. Currently, permits are present in only 3 states; management expects permits to gradually lifted for majority of these (except Delhi).
Model-specific details: Post new Discover (110-125cc) launch, currently selling 18,000 units per month; expected to go up to 25,000 unit per month. Avenger sold approximately 8,000 units per month in FY18. Total 1,06,000 units sold in FY18. Expecting to sell 106,000-107,000 Avengers in FY19. KTM sold 46,000 in domestic market and 56,000 units in export markets. Management expects 10-12% growth in KTM volumes in FY19.
Bajaj Auto Ltd is currently trading at Rs. 2,812.55, down by 6.6 points or 0.23% from its previous closing of Rs. 2,819.15 on the BSE.
The scrip opened at Rs. 2,844 and has touched a high and low of Rs. 2,942.05 and Rs. 2,762.85 respectively. So far 15,50,331 (NSE+BSE) shares were traded on the counter. The stock is currently trading above its 200 DMA.
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