Bajaj Auto skids 4% on disappointing February sales; hits over 5-month low

Shares of Bajaj Auto slipped 4 per cent to Rs 2,785 on the BSE on Monday after the company reported a 10 per cent year on year (YoY) drop in total auto sales at 354,913 units for the month of February 2020.

The two-wheeler maker missed analysts' expectations by a decent margin. Nirmal Bang Equities, for instance, had expected total auto sales of 382,844 units, while Emkay Global Financial Services had expected total sales of 374,000 units for the month.

The stock was trading lower for the seventh straight day, plummeting 10 per cent during the period, as against a 7 per cent decline in the S&P BSE Sensex. It was quoting at its lowest level since September 29, 2019.

The company that manufactures motorcycles, three-wheelers and their parts had sold a total of 393,089 units in the corresponding month of 2019.

“Total domestic sales (2 wheeler + CV) declined 24 per cent to 168,747 units in February 2020, as against 221,706 units in February 2019. Total exports, however, rose 9 per cent to 186,166 in February 2020 from 171,383 units in February 2019,” Bajaj Auto said in an exchange filing.

Total 2-wheeler sales in February 2020 stood at 310,222 units, down by 5 per cent from 327,985 units in February 2019. Total commercial vehicles sales declined by 31 per cent to 44,691 units February 2020 as against 65,104 units reported in February 2019, it added.

Bajaj Auto’s 10-month’s volume of 4.37 million units is 5.5 per cent down YoY. This is mainly due to 13 per cent fall in the domestic motorcycle volume.

Auto analysts at Maybank Kim Eng Securities believe the situation is unlikely to improve soon as the company confirmed that the contraction in volume for the industry may continue in H1FY21 due to a sharp rise in vehicle prices necessitated by mandatory adoption of BSVI-fitted vehicles.

“The revenue impact for Bajaj Auto would be cushioned due to exports growing at 5 per cent and increase in vehicle prices due to addition of BSVI components. We believe the margin performance would be slightly better in FY21E due to continued strong performance in exports, benign raw material costs and reduced discounts as old BSIV stock would run out,” the brokerage firm said stock update.

At 11:42 am, Bajaj Auto was down 3.4 per cent at Rs 2,792 on the BSE, as against a 1.54 per cent rise in the S&P BSE Sensex. The trading volumes on the counter nearly doubled with a combined 635,568 shares changing hands on the NSE and BSE so far.