Bajaj Auto expects pent-up demand to boost second quarter retail sales
Bajaj Auto Ltd – one of the largest motorcycle manufacturers in the country – expects retail sales of motorcycles to improve in the second half of the year due to pent-up demand in the domestic market after the gradual easing of prices. regional restrictions. The company, however, expects wholesale shipments to remain below retail demand as dealers hold inventory in a 7-8 week range.
Bajaj also reported its second-highest export volumes of 650,000 units in the June quarter and the company expects volumes to strengthen again as some of the African and Asian markets. people in the East are recovering from the surge in Covid cases.
According to Rakesh Sharma, executive director of Bajaj Auto, the first quarter was difficult to navigate largely due to the suddenness of the second wave, but exports were stable despite the logistics problem.
“In the future, there is this hidden fear about the third wave. That aside, we should see a good rally on pent-up demand being released into the market. In domestic motorcycles, the wholesale will be lower than the retail because there is a sufficient level of stock in the channel. This was not the case last year. In the aftermath of the post-covid BS4 to BS6 transition, pent-up demand arrived and it was necessary to replenish the channel’s stocks. It was a double benefit, ”said Sharma.
The auto industry came under pressure from the first week of April, when Maharashtra began strict lockdown measures. Delhi, Haryana, Karnataka, Tamil Nadu and others have followed suit. Most manufacturers have stopped production or drastically reduced their production.
Some, like Bajaj Auto Ltd, however, continued to operate with limited capacity to meet export orders. With infections steadily declining, most automakers resumed operations from mid-May.
“I guess the exports will remain stable and we are talking about almost 2 lakh per month and this should continue. Some of our key markets like the Philippines, Cambodia and Uganda are facing a serious pandemic problem. Hopefully if the cases start to recede, we will see these markets come into play as well. So by the end of the second quarter or the beginning of the third quarter, these markets will be back and strengthen exports, ”said Sharma.
He also added that the only downside for the company is the increase in raw material costs and that due to the fragile economic recovery after the second wave, the company is struggling to pass on this increase. “So we have to see how to handle this. Hopefully, with the return of demand, the operating leverage we lost will return in the second quarter. “
Bajaj Auto doubled its net profit by ₹1061.20 crore for the quarter ending June 30, on an annual basis, due to last year’s low base. The company reported a net profit of only ₹528 crore for the corresponding period of the previous fiscal year due to the nationwide lockdown to tackle the first wave of Covid-19.
The Pune-based manufacturer reported a net profit of ₹1551.28 crore in the fourth quarter of fiscal 21.
Operating revenue increased by 139.86% to reach ₹7386 crore due to strong export orders during the quarter. On a sequential basis, the company’s turnover increased from ₹8,596.10 crore in the fourth quarter of fiscal 22.
Bajaj’s operating profit or earnings before interest, taxes, depreciation and amortization (EBITDA) also increased 174% to ₹1120 crore and operating margins also increased 190 basis points to 15.2% due to cost reduction efforts and increased volumes.
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