Expect the Unexpected

Bajaj Auto, Mahanagar Gas

As I highlighted in my post on 2-hour Investor I run a small experimental trade portfolio. One of my position in this portfolio was Bajaj Auto.

My reasons for entry were nice CUP and HANDLE shaped consolidation on chart in a quality company which has been on significant uptrend a pattern which I learned from William O Neil

The position gave me a quick 15% in 3 weeks before trending down, since the technical indicator I was relying to exit was still intact I didn’t do anything and continued to keep my standard 10% stop loss from buy to protect from unexpected drawn in markets

And the unexpected event happened

Bajaj Auto reported Q2 Fy25 results¹ and stock was down 12% in a day, the reason was sizeable gap between their standalone and consolidated results

Bajaj Auto Limited's consolidated financials show a sizable gap, nearly 600 crores, primarily due to losses from their associate investment in Pierer Mobility AG (PMAG).

• PMAG is the listed holding company of brands such as KTM, GasGas, and MV Agusta. Bajaj Auto effectively holds a 37% stake in PMAG through its subsidiary in the Netherlands, BHB.

• PMAG reported a loss of 172 million Euros for the first half of 2024 compared to a profit of 53 million Euros for the same period in 2023.

• The loss is attributed to "economically volatile and difficult conditions," particularly in the US, which impacted exports of KTM motorcycles.

• Other factors include expenses from restructuring their bicycle segment and rising production and personnel costs in Europe.

Bajaj Auto's accounting practices require them to consolidate PMAG's results twice a year, thus the 172 million Euro loss translates to about 60 million Euros (580 crores) on their consolidated financials.

2nd position that had adverse impact was

Mahanagar Gas

This was also brought based on upper channel set up

Company announced²

Allocation to the Company for CNG (Transport) has been reduced by ~20%, effective October 16, 2024, compared to previous average quarterly APM allocation. This being major reduction in allocation, will have an adverse impact on the profitability of the Company.

My stop loss hit and I am out of positions, this quick note is to emphasise the fact that nothing in market can prepare you from unexpected events so have a strong risk management plan in place if something like this hits your positions.

1. https://www.bseindia.com/xml-data/corpfiling/AttachLive/6110cc58-527a-43dc-bd0c-999e9d824c40.pdf

2. https://www.bseindia.com/xml-data/corpfiling/AttachLive/a11cf1a5-6bfd-4f1e-b94b-13c9c1a3d60d.pdf