Bajaj Auto may see sales of 4 lakh units by Q1FY12

In an interview with CNBC-TV18, Rajiv Bajaj, managing director of Bajaj Auto, spoke about the latest happenings in his company and the road ahead.

Below is a verbatim transcript of the interview. Also watch the video.

Q: Can you start by giving us the March total numbers and a breakup?

A: March is actually been a good month for us — possibly our best March ever. We have done close to 300,000 motorcycles and 40,000 three-wheelers. So that’s a total of 340,000 vehicles. It includes an export of about 101,000 motorcycles and three wheelers. But I hasten to add one thing that as is the case with every March we have some vehicles, which are in transit, as far as exports are concerned, that is about 32,000. But otherwise we have had a wonderful March. This 32,000 would be accounted for in April.

Q: How did it breakup between Pulsar and Discover?

A: Pulsar is about 75,000 vehicles, while Discover is about 125,000-130,000 vehicles. Due of the technicality of vehicles in transit, I myself don’t have absolutely exact figures. The balance as usual is equally divided between the Platina, which we sell in the domestic market and Boxer for exports. That makes up 300,000 bikes and the balance 40,000 is three wheelers.

Q: You have a new launch as well. Before we talk about the details of that, on the basis of that new launch are you relooking your full year volume targets for this new financial year?

A: We have basically set ourselves a target of 20% growth for this year. That would mean that from about 3.85 million vehicles we have to move up to about 4.6 million vehicles, hopefully a little more, but at least 4.6 million. Somewhere between 4.1 and 4.2 million motorcycles is what we are targeting and about half a million three wheelers.

The growth in motorcycle volumes to 4.1 million or 4.2 million would be difficult or challenging let’s say because that needs to grow by 20% in a market that we anticipate will grow by perhaps between 12-14%. That’s where the Discover 125cc, we launched towards the end of the last financial year, would be valuable.

We are looking at initial sales level of 25,000 vehicles a month from that particular product and hopefully we can do some more.

Q: So in these 4.6-4.7 million units marked in for FY12, what is the breakup that you have done internally between the Discover, Pulsar and also the new 125 cc?

A: We expect to do over a million Pulsars. We are close to 900,000 this year so we would like to do over million that is both domestic plus exports and we are looking close to 1.7 million Discovers, which would be a growth of about 25% over what we have done last year

The growth in Discover, we hope, will be greater and we expect it will be greater than in Pulsar partly because we have started the year with the new Discover and also partly because as you perhaps know Pulsar is about 50% market share in the sport segment. So it’s not so easy to grow market share there whereas with the Discover we still have some headroom to grow market share.

So between the two that I refer as our bigger and sportier bikes we are hoping to do almost 3 million vehicles which should augur well for our EBITDA to keep it in the 20% or so space that we like to be in. the balance 1.1 million would be Platina and Boxer.

Q: So to get to 4.6-4.7 million you would imagine that at some point in the year you would be starting to clock more 4 lakh vehicles a month. When do you expect to hit that kind of run rate?

A: What might happen is we might get lucky and do close to that in April and May itself because, as I mentioned earlier, technically 32,000 vehicles will be accounted for in April. We are looking at April total sale of about 3.8 lakh vehicles and May is usually better than April.

I would like to think sometime in the Q1 we can at least touch that figure of 400,000 vehicles but surely as we are halfway through the year we should be closer to it because we will launch the Boxer sometime in August again into the commuter space — not in the low price space — but in the space of typical large selling commuter deluxe motorcycles.

We are hopeful that since this motorcycle also sort of creates its own category we are looking at it contributing another 200,000-300,000 vehicles for Bajaj next year as well. So once that is in we should be firmly in the region of 400,000 a month.

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F And O Check: Siddharth Bhamre advises to go long on Larsen, JP Associates, DLF

Siddharth Bhamre of Angel Broking advises to go long on Larsen and Toubro, Jaiprakash Associates and DLF

Larsen and Toubro (L&T)

Bhamre told CNBC-TV18, "BHEL has seen significant move in the last 2-3 sessions and huge pile up of long positions and that trade has gone now in terms of risk reward ratio, so I won’t suggest go long in BHEL." He further added, "Today I am quite optimistic on Larsen and Toubro (L&T), we have seen lot of short positions have got accumulated in this stock. There might be a copycat kind of trade, which would happen because BHEL has gone so probably now L&T would also follow the same. If not long positions but at least we are expecting some kind of short covering. We have option related strategy also in place in this where we have done ratio bull call spread. But I would suggest today to go long in L&T and I am expecting a price of Rs 1680-1700 in few trading sessions to come in L&T."

Jaiprakash Associates

Bhamre said, "I like Jaiprakash Associates personally also. The stock had taken support around Rs 82-83 mark and from there we have seen good upsurge move. We are seeing good amount of long build up. Difficult to say that whether it would reach 3 figure or not, but Rs 95-96 is pretty much on the cards." He further added. "Those who have found long positions around Rs 83-84 we are among them. We would hold up to Rs 95-96 levels and probably think of booking some profit over there."

DLF

Commenting on DLF, Bhamre said, "We did see Unitech; thanks to some reports in the market that, lot of long positions have got build up over there. In DLF yesterday we saw open interest addition. We prefer DLF over Unitech from trading perspective. So I would suggest that if somebody really wants to go long in realty from trading perspective, DLF can go up to Rs 250-255 levels, so that is one stock." He further added, "From investment perspective, I think HDIL is better than Unitech or DLF that is our house call."

Mkts likely to recover faster: PN Vijay

Portfolio Manager PN Vijay said that India has managed domestic inflation and the interest rate scenario fairly well. He believes that markets may bleed for some more time due to high inflation but should be out of the woods a lot faster.

Sudarshan Sukhani of Technical Trends said 3,850 is the next support level for the markets. "If 3,850 and 3,600 breaks, then the market has no support for the next 1,000 points."

Excerpts from CNBC-TV18’s exclusive interview with PN Vijay and Sudarshan Sukhani:


Q: Is there any end to this agony?

Vijay: We thought there was some buying yesterday but it got totally wiped out in today’s trade. There would be an end when a couple of these issues get resolved decisively.



The first issue is that of the nuclear deal and the stability of the government. The second is high oil prices and the third is domestic inflation. Unless either of these has been put to rest, one does not see any fresh buying in a large scale.



The nuclear deal should go off the front in about a week or so. The government seems to have got their act together and will slip through this whole thing without any major damage. One needs to wait a bit more in case of inflation. One doesn’t know how much the base effect really is and how much this has impacted inflation. So, we would see inflation for some more time.



Q: Having seen bear markets in the past, do you think that we may be made to wait longer than what seemed the case in January and March? We were all talking about the recovery by the end of the year.





Vijay: I lived through the 2000 bear market, which was the most recent one. There is a lot of similarity; the valuations got very high and the fall was very swift. But there were a couple of major differentials. The broad economy was at that time already starting to go down and we came to a growth rate of 4.5% or so in 2002-03. Agriculture was down as that year had one of the worst droughts. So, things were getting worse from the start of the top in February of 2000. So, the signs were clear.

There was a case of high interest rates as well. The IDBI’s of the world were borrowing at 18% at that time. The real estate interest rates were really high and corporate India was finding it very difficult to borrow. From these parameters, if you look at the last 6 months of downtrend that we had, we have managed the domestic inflation and the interest rate scenario fairly well.



I don’t see any large corporates really feeling the pinch for money. The macroeconomics is definitely not that bad as it was when the last bear market started. So, we will have to bleed some more time for inflation but we should be out of the woods a lot faster.



Q: What is your take on real estate Yesterday, DLF announced a buyback. All stocks were up 10-12% and today they have almost gone back to where they came from. Do you think there is more pain left in that sector?




Vijay: There could be more pain in this particular sector as compared to the other rate sensitive sectors like banking and auto. There is a genuine oversupply in the market. It is not driven by interest rates or even a lack of demand.



Even if one assumes that inflation was at 6% and there was no bad news last year, I still think that the sector was looking for a severe correction because of the sheer oversupply across the country. Punters who had borrowed money to get into allotments were really dropping off.



So, companies like DLF and Unitech that have funded themselves very well, will pull through. But midcap ones like Sobha, Parsvnath or Omaxe and many of them who are cash strapped would take a lot longer to pull through.



Q: Are you buying any of the metal stocks at this point? The good qualities like TISCO and Sterlite of the world were falling at the rate of 10%. Would you buy anything there at all?



Vijay: We did buy Tisco today. At around Rs 650, Tisco is an excellent buy. It is making a lot of money on steel prices. Even with the high cost of production, Tisco is my top pick in the metal sector at these beaten down levels.




Q: Are you buying any banks right now? Do you think you will get better prices over the next few weeks and months?



Vijay: We have been pecking at Axis Bank at around Rs 600 levels because a majority of brokerages, even the foreign ones who are rather negative right now on the markets, have been giving buy signals. This is a superb bank that has capitalised itself very well and has not rushed into home and auto loans. They have got a very well heeled balance sheet. It is a very modern, technology driven bank. So, we have been pecking at Axis Bank at Rs 600 levels.



Q: Is there any hope that we may form some kind of a base around these levels?



Sukhani: There is always hope. We can always wait and expect something better. The chances are very dim. Yesterday, we saw lows of 3,850. If these lows hold on, which means the Nifty doesn't go down again and breaks them, then we rally and reach 4,350 which was the last recorded high. That will show us some strength in the market. There are so many ifs, but this is a possible scenario. The question is about hope. I don't hold much hope because yesterday rally was a classic bear market run up. The bear market is alive and kicking, and today's market action has confirmed that. So, there is a theoretical possibility that 3,850 will hold on. We will start a bull run and reach 4,350. But the chances as of today are pretty low.



Q: What's the next level of support you would watch, because 3,850 is just about 50-70 points away, and that is an hours work nowadays?



Sukhani: Yes, it is and that is the worry. Earlier, I spoke about 3,600, but now with a pivot low being made yesterday, that level shifts to 3,850. If 3,850 is broken, it is equivalent to saying that 3,600 would have been broken, then the Nifty is heading for a freefall because there is nothing to support it for the next 1,000 points down.



Just four months ago when 5,500 was being broken, I had suggested there is a 1,000 points vacuum. That did workout. When 4,400 was broken, some said there is no support. We have seen a 600-point decline. Now at 3,600-3,700-3,800, whatever is one's pick, there is nothing for the next 1,000 points. The Nifty can stop wherever it wants.



Q How do you trade now then, do you just remain neutral and watch till that 3850 and then take a decided technical call?



Sukhani: Yes, because what has happened in two days is that volatility is increased. Traders get killed by volatility, even if they make the right call in terms of direction these intra-day up and down moves can actually stop them out many times. So at this point it's wiser to stay away. Let's wait for the re-conformation that the bear market is intact when 3,850 breaks. If the market moves up, I am not taking long positions. There will be no short positions but the market will convincingly go up to 4,350 for traders to go long now.



Q: Two charts which were particularly weak today are Tata Steel after that big 10% fall, and ICICI Bank which couldn't quite follow SBI in its rally?



Sukhani: ICICI Bank has broken down all support levels much earlier. A target of Rs 500 is within striking distance. It doesn't have a good chart at all.



Tata Steel has been a big disappointment because the chart suggested initially that in its bull run, it would ignore whatever happens to the Indian market. But that hasn't happened. It has broken down significant support levels. While it is difficult to say where it will end up, its no longer a buying opportunity. So, one has to get out of the stock when one can.

Thanks to http://www.moneycontrol.com