Bajaj Auto Q2 profit falls 1% on weak sales, high input costs
Mumbai: Bajaj Auto Ltd’s net profit declined for a fourth consecutive quarter because of weak motorcycle sales in both overseas and domestic markets and higher input costs.
Net profit at the maker of Pulsar and Discover motorcycles fell 0.97% to Rs1,112 crore in the quarter to September from Rs1,123 crore a year ago. Net sales rose 2.12% to Rs6,461.3 crore from Rs6,327.12 crore a year ago.
Sales for this fiscal year are not comparable to the previous year’s numbers because they are disclosed net of the goods and services tax (GST), introduced in July, the company said in a BSE statement.
The company’s motorcycle volumes during the quarter (including exports) advanced by a mere 2% to 918,721 units over the same period a year ago while total three-wheeler sales grew 14% to 152,789 units.
The company had been expected to post a profit of Rs1,090 crore on net sales of Rs6,289 crore, according to a Bloomberg survey of 19 analysts.
Bajaj Auto’s earnings before interest, tax, depreciation and amortisation (Ebitda) margin, a measure of operating profitability, narrowed to 20.8% in the quarter from 22.3% a year ago.
The margin could have shrunk more if not for the company’s higher operating leverage and richer product mix of three-wheelers and premium motorcycles. “Our estimate was 100 basis points lower. The surprise came from higher realizations and average selling price,” said Joseph George, an analyst at IIFL Institutional Equities.
Bajaj has outperformed its peers in the three-wheelers market both domestic and overseas, but it has lagged in motorcycle sales. Bajaj has been growing slower than the broader motorcycle market. India's domestic motorcycle sales grew 12.2% to 56,11,141 units during the quarter whereas Bajaj's domestic sales were almost flat at 583,997 units in the same period, according to data from the Society of Indian Automobile Manufacturers (Siam).
Ravikumar of Bajaj said the worst could be behind the company. “A major issue for us has been in the entry-level segment and the domestic market,” he conceded. But newly launched models and variants including the CT100, Platina ES100 and the new Platina ComforTec “have solved these problems as September sales reflected,” he said. Even the domestic three-wheelers and exports—the two other cash generating businesses are also “falling in place,” he added. By the end of fiscal 2017-18, Bajaj aims to export 1.8 million units and corner a 25% share in the domestic motorcycle market, said Ravikumar.
Higher expenses on raw materials, including aluminium and steel, also singed company's margin. The company's raw material costs as a percentage of sales in the quarter rose to 63.7% from 59.27% a year ago. Ravikumar said the company is considering passing on the increase in raw materia prices. He declined to specify the extent of a price hike.
Bajaj Auto shares closed at Rs3,257.00, up 1.09% on the BSE, while the benchmark Sensex was down 0.08% to 32,609.16 points.
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