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Bajaj annual report highlights ambition to cross 2mn vehicle exports in around 3-4 year time
and remain focused on quality and performance bikes in domestic market. A sharp saving in
advertisement expenses (42% yoy) and high reliance on export incentive (12% of PBT) may
be difficult to sustain in medium-term. Sell
Export remains key driver of volume growth
Chairman' s address highlights its ambition to cross 2mn exports in next 3-4 years time
from current 1.2mn i.e. CAGR of 14-19%. This is within our estimate of 15.8% CAGR for
FY11-13F.
Amongst export markets, Sri Lanka (76% yoy) and Indonesia (81%) were highest growth
markets followed by Bangladesh (34%).
Key export markets for FY11 : Africa & middle east (48% of export volume), South Asia
(excl India) (28%), Latin America (17%) and rest by South East Asia.
Export incentive was Rs.45.5bn in FY11, which is 9.7% of total export value and 12.2%
of normalised PBT. With uncertainty surrounding export incentive scheme (DEPB)
extension, our estimate for FY13F onwards are at risk.
Domestic markets - Brand focus highlighted
Management highlights continued shift in domestic motorcycle industry segmentation
towards commuter deluxe segment as it improves to 51% of industry volume in FY11 vs
45% in FY10. Whereas, rest is equally shared by commuter standard and sports bikes.
Bajaj with Discover 100 and 150cc bikes, is at forefront to drive this change, as they clock
1.2mn sales in FY11 i.e. 51% of its total domestic volume. Sports bikes inched-up contribution
to 33% (from 31%) of total volume, whereas commuter standard bikes dip to 16% of its total
volume from 24% earlier.
Management highlights 37% rise in dealership numbers to 589 by end of FY11.
Management guides for KTM Duke 125cc bike platform to be leveraged to make 200cc bike
for domestic market by end of FY12F.
Financial details - can it sustain low advertisement and R&D costs ?
Detail cost schedules highlight, sharp 42% yoy dip in advertisement cost for the company to
just 0.5% of net sales, which is lowest ever proportion as compared to 1-1.5% range
historically. Sustaining such low advertisement costs seems difficult considering its high
decibel of new product launches.
Total research and development costs dip 7.5% yoy to Rs.1.25bn, which is just 0.8% of net
sales. This is one of lowest in last 5-years, as compared to its range of 1.1 to 1.3% of net
sales.
Company increased its stake in KTM Power Sports AG from 31.92% to 39.6% at cost of
Rs.2.1bn.
Manufacturing capacity at 5.04mn by end of FY11, management feels is comfortable to cater
current demand trend. Its focus will be towards executing 4-wheeler product development and
delivery in 2012.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bajaj annual report highlights ambition to cross 2mn vehicle exports in around 3-4 year time
and remain focused on quality and performance bikes in domestic market. A sharp saving in
advertisement expenses (42% yoy) and high reliance on export incentive (12% of PBT) may
be difficult to sustain in medium-term. Sell
Export remains key driver of volume growth
Chairman' s address highlights its ambition to cross 2mn exports in next 3-4 years time
from current 1.2mn i.e. CAGR of 14-19%. This is within our estimate of 15.8% CAGR for
FY11-13F.
Amongst export markets, Sri Lanka (76% yoy) and Indonesia (81%) were highest growth
markets followed by Bangladesh (34%).
Key export markets for FY11 : Africa & middle east (48% of export volume), South Asia
(excl India) (28%), Latin America (17%) and rest by South East Asia.
Export incentive was Rs.45.5bn in FY11, which is 9.7% of total export value and 12.2%
of normalised PBT. With uncertainty surrounding export incentive scheme (DEPB)
extension, our estimate for FY13F onwards are at risk.
Domestic markets - Brand focus highlighted
Management highlights continued shift in domestic motorcycle industry segmentation
towards commuter deluxe segment as it improves to 51% of industry volume in FY11 vs
45% in FY10. Whereas, rest is equally shared by commuter standard and sports bikes.
Bajaj with Discover 100 and 150cc bikes, is at forefront to drive this change, as they clock
1.2mn sales in FY11 i.e. 51% of its total domestic volume. Sports bikes inched-up contribution
to 33% (from 31%) of total volume, whereas commuter standard bikes dip to 16% of its total
volume from 24% earlier.
Management highlights 37% rise in dealership numbers to 589 by end of FY11.
Management guides for KTM Duke 125cc bike platform to be leveraged to make 200cc bike
for domestic market by end of FY12F.
Financial details - can it sustain low advertisement and R&D costs ?
Detail cost schedules highlight, sharp 42% yoy dip in advertisement cost for the company to
just 0.5% of net sales, which is lowest ever proportion as compared to 1-1.5% range
historically. Sustaining such low advertisement costs seems difficult considering its high
decibel of new product launches.
Total research and development costs dip 7.5% yoy to Rs.1.25bn, which is just 0.8% of net
sales. This is one of lowest in last 5-years, as compared to its range of 1.1 to 1.3% of net
sales.
Company increased its stake in KTM Power Sports AG from 31.92% to 39.6% at cost of
Rs.2.1bn.
Manufacturing capacity at 5.04mn by end of FY11, management feels is comfortable to cater
current demand trend. Its focus will be towards executing 4-wheeler product development and
delivery in 2012.
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