Bajaj Auto - Is the company back on growth track?

Summarizing the last few interactions of management with media

  • ET (01-12-2020)/Nirmal Bang (03-12-2020)
    o Oct-November: Retail sales are about 10% lower in 2020 compared to 2019, the expectations of OEMs have not been met
    o Higher cc bike segments have done much better with growth (125 cc has done well)
    o Want to maintain 35 days inventory at dealer network (currently at 41 days; need to correct to bring it back to normal levels)
    o Africa demand is back to 95%, Bangladesh is doing well; Latin America back to 85% levels (higher profitability market for bajaj auto due to higher realizations); Export demand back to over 200’000 bikes each month (could have done 25% higher sales if not for supply chain constraints)
    o Sri Lanka is facing economic problems and government has stopped imports until 2021 (forex exchange crisis)
    o Import 3-4% of raw materials
    o Chetak has faced immense supply chain problems (as a result unable to cater to the demand for chetak)
    o Retail financing has been lower by 10-15%
    o 3-wheeler has come back to 60% levels; people mobility is back to ~80% levels
  • ET (24-12-2020)
    o KTM volumes have gone up from 65’000 motorcycles in 2007 to 300’000 in 2020
    o KTM has witnessed very strong growth internationally ranging from 30-100% in different geographies because people in lower strata in developed countries are shifting from public transport to motorcycles (125-400 cc range). Said want to go big in Mexico (Hero announced on 27.01.2020 their forey into Mexico; may become a competitive market)
    o Indian motorcycle market is well penetrated
    o MEIS hit for company was 250-300 cr/annually
    o Profitability has improved due to higher contribution of higher cc bikes compared to commuter segment; entry level commuter segment has done worse than industry
    o Future plans: upgrade an introduce new bikes over the next 2-years especially in the higher end segment; upgrade electric vehicle portfolio; want to do some work on micromobility with partner yulu
    o Want to take exports from 200’000 to 300’000/month; Want to focus on Brazil market where Bajaj is not present
  • CNBC (02.02.2021)
    o Retail sales have tapered off, pushing at the upper end of the portfolio (125 cc+). It is at 65% of portfolio now and has grown at 30%+
    o Top half of motorcycles is performing very well, have lost market share in lower half of portfolio
    o Export markets have come back very nicely except for ASEAN

Disclosure: Invested (decreased position size recently; latest position size here)

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