Will resume operations at plants only when dealerships open up – Rajiv Bajaj, Bajaj AutoSharvari Joshi
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Excerpts of an interview with Mr. Rajiv Bajaj, managing director – Bajaj Auto with CNBC -TV18 dated 29th April 2020:
- He expects the two-wheeler manufacturer to operate at about 50 percent capacity next month.
- Prime Minister Narendra Modi on Monday told states that India has to work on restarting the economy as well as continue the fight against COVID-19. Several states are keen to extend the lockdown in hotspots.
- In the last one week itself they have seen some positive developments, specifically their Pantnagar plant has been given approval progressively to operate at full capacity, which they cannot till their dealerships open up.
- They have that approval on the supply side. Progressively they are getting the same approval for their Aurangabad plant.
- The Chakan plant outside Pune has not received a nod for production, which is unfortunate as that is the company’s main export plant. On 28th April, they received permission to shift goods from there.
- He said, “In the month of April, fortunately because we do export, we will see sales of something like 30,000-35,000 numbers. In May, we are looking at operating at about 50 percent of capacity across all our plants put together which points to about 200,000 vehicles. Again the majority would be for exports.
- In June, we are hoping – subject to how things are unlocked – to record something in excess of 250,000 vehicles, which means we are about our two-third capacity. So from this point of view, it is not so bad for us but that is again because half of what we make is exported,”he added.
- They have already implemented almost all of the cost cutting measures. It will save them somewhere between Rs 150 crore and Rs 200 crore this year.
- What they have continued to clearly communicate to people is that there are no plans to cut jobs and they are not going to cut jobs at this stage.
- He said, “I would make only one recommendation which is we cannot save ourselves out of this crisis. We have to sail ourselves out of this crisis. If the government cannot reduce goods and services tax (GST), there are other suggestions I had made with respect to the insurance, with respect to the absurd safety norms that were brought in last year. If those things are corrected at the front end and there is some liquidity brought in the NBFCs etc, the demand side will be fine.”
Consensus Estimate: (Source: market screener and investing.com websites)
- The closing price of Bajaj Auto Ltd was ₹ 2,433/- as of 4-May-2020. It traded at 14x/ 15x/ 13x the consensus earnings estimate of ₹ 169/ 163 / 185 for FY20E/21E/22E respectively.
- The consensus price target of Bajaj Auto Ltd is ₹ 2,998/- which trades at 16x the earning estimate for FY22E of ₹ 185/-.
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