Mumbai: Bajaj Auto, India’s second-largest motorcycle maker, met forecasts with a doubling in quarterly profit and analysts expect margins to improve on rising sales and lower wage-related expenses.
The maker of top selling motorbikes such as the Pulsar and the 100cc Discover is riding an economic rebound in India that has boosted consumer spending and bolstered the outlook for companies.
Vineet Hetamasaria, auto analyst with PINC Research, said Bajaj’s profit margins would increase in the September quarter as production is ramped up, while it would not have staff costs linked to salary arrears paid out in April-June.
Bajaj said production constraints had limited sales growth in the June quarter, but output would rise to 300,000 units a month from July following capacity expansion from 280,000 units.
“The additional sales will offset higher input costs, if any,” said Hetamasaria. “In this quarter and next, there will be further improvements in margin.”
Bajaj also announced one bonus share for every held, its first free offering in 13 years, boosting its shares as much as 3.7% in a choppy Mumbai market.
The company said net profit jumped to Rs5.9 billion in its fiscal first quarter ended June from 2.93 billion a year earlier. The earnings were in line with analysts’ expectations.
Larger rival Hero Honda Motors, 26% owned by Japan’s Honda Motor Co, is expected to report a 19.4% rise quarterly profit next Thursday.
Bajaj’s sales rose 65.4% to Rs37.37 billion in April-June from 22.59 billion, while volume jumped 70% to 928,336 units. Operating margin fell to 20% from 22.9% in the March quarter as raw material costs as a percentage to sales rose to 71% from 69.3%, the company said.
The company is on track to achieve its target of selling four million vehicles in 2010-11, with an operating margin of 20%, Bajaj said in a statement.
Shares in Bajaj Auto, valued at $7.4 billion, have risen nearly 40% so far this year, compared with 12% gain for the sector index and the main index that is up 3%.