Bajaj Auto Ltd, the 2nd largest manufacturer of two-wheelers in India,
reported less growth compared to its peers and its production
constrains, decreasing brand image, market acceptance detoriating
quality & inability to achieve target sale.
In Indian domestic market, 1st half of 2011, 2-wheeler segment growth
is 20% while Bajaj auto growth is 5.39% as compared to Hero Moto Corp
sales - 22%, Honda sales – 13.21%, Yamaha sales – 37.73%, Suzuki sales
- 39%, for the period of April to September 2011 as compared to same
period in 2010. In future there will be intense competition between
Honda, Hero MotoCorp, Suzuki and Yamaha.
Company
H1 2011
H1 2010
% Growth Avg % compared to the Industrial growth of 20%
Hero Moto Corp 3073852 2519973 21.98% + 1.98%
Bajaj Auto 1138910 1080632 5.39% - 14.61%
TVS Motors 971824 854536 13.73% - 6.27 %
Honda Motors 922979 815310 13.21% - 6.79 %
Yamaha 231032 172289 37.73% + 17.73 %
Suzuki 172631 125355 39.12% + 19.12 %
Honda is emerging in a very big way and it is doubling its production
capacity to 4 million within a year. Suzuki is also doubling its
production capacity, while Yamaha is on a verge of tripling its
production capacity.
Bajaj Auto will get a hit at its export front as Hero MotoCorp has set
up 1.2 lakhs per month production capacity plant in Sanand (Gujarat
project near Ahmadabad) dedicated 100% export and Honda, through its
China plant has introduced its new variant (pricing 31,000 INR) in
Nigerian and South African market (Nigeria and South Africa contribute
50% export sales of Bajaj Auto). Hero MotoCorp has initiated its
distribution network in all the 11 countries where Bajaj is
exporting.
Piaggio is also penetrating in the two wheeler segement in India in an
ambitious way by setting up an assembly plant in Baramati near Pune
where the inputs will be 80% imported. They have already appointed 70
dealers throughout India. They are coming up with attractive
variations of bikes in January 2012.
In three wheeler segment, Mahindra & Mahindra, Piaggio, TVS are
capturing market firmly. TVS is tripling its capacity to 8000 units /
month, while Italian based Piaggio is increasing its capacity to 40000
units / month.
With Government withdrawing DEPB (Duty Entitlement Passbook Scheme)
benefit scheme for exporters, Bajaj auto will face severe problems in
terms of their fall in export profit margin by 8%. Rajiv Bajaj, MD,
Bajaj Auto, stated his concern regarding the fall in export to take
place due to withdrawing of DEPB scheme and increasing competition
from China market in exports. He also shared his worry about further
slowdown expected in two wheelers in India
Due to intense competition from peers and falling market share of
Bajaj Auto (Y-o-Y), it will downgrade to 4th position from its 2nd
position in two wheeler segment giving its way to Honda & TVS in
Indian market.
Thus studying the fundamental and technical aspect of Bajaj Auto, it
is trading at its highest level and we recommend a STRONG SELL on
Bajaj Auto at CMP 1697 with target it falling down to 1100 soon.
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