Three wheelers drive Bajaj Auto net

Company’s profit rises 2.8% to Rs.818.74 crore; net sales rise to Rs.5,307 crore from Rs.4,839.95 crore
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First Published: Wed, Jan 16 2013. 11 43 PM IST
Bajaj said sales of three-wheelers and motorcycles in the quarter rose 5%. Photo: Hindustan Times
Bajaj said sales of three-wheelers and motorcycles in the quarter rose 5%. Photo: Hindustan Times
Updated: Thu, Jan 17 2013. 12 24 AM IST
Mumbai: Bajaj Auto Ltd said the company’s profit rose 2.8% to Rs. 818.74 crore in the December quarter from a year earlier on the back of robust three-wheeler sales and the higher contribution of costlier motorcycles in its portfolio.
Net sales at the Pune-based firm, India’s largest maker of three-wheelers and second-largest motorcycle manufacturer, rose to Rs.5,307 crore from Rs.4,839.95 crore. The earnings were in line with estimates.
A Mint survey of five analysts had pegged profit at Rs.813 crore and sales at Rs.5,260 crore.
Bajaj Auto’s stock fell 2% to end trading at Rs.2,072.95 on BSE on Wednesday even as the bourse’s benchmark Sensex fell 0.85% to 19,817.63 points. The BSE auto index fell 2.4% to close at 11,335.09 points.
Sales of three-wheelers and motorcycles in the quarter rose 5% to 1.13 million units from a year earlier, the company said in a filing to BSE.
“Bajaj Auto’s net profit was higher than our estimate, led by higher EBIDTA (earnings before interest, depreciation, taxes and amortization) margin of 18.7% driven by richer product mix and higher contribution from three-wheeler exports and better dollar/rupee realization,” wrote Rikesh Parikh, vice-president, market, strategy and equities at Motilal Oswal Securities Ltd, in his note after the earnings.
During the quarter, the company sold a record 64,168 three-wheelers in India, an increase of 23% from a year earlier. The growth in sales was led by the diesel passenger carrier segment.
S. Ravikumar, senior vice- president, business development and assurance at Bajaj Auto, said the domestic three-wheeler sales have been boosted as new permits were issued in Delhi, Hyderabad and a few other cities. With an average price of Rs.110,000 against Rs.49,000 for motorcycles, the three wheelers are not only a bigger revenue generator for the company but also contribute to the operating margins in a more significant way. According to analysts’ estimates, the company’s operating margin on a three-wheeler is Rs.25,000 per unit compared with Rs.6,000 per unit for motorcycles.
While sales of motorcycles in the domestic market gained 7% to 687,351 units from a year earlier, exports declined 2%. The company’s operating margin narrowed to 20.1% in the quarter from a year earlier.
Bajaj attributed the decline in exports to high inflation and adverse balance of payment position. Also, globally the central banks and governments are curtailing consumption, said the company in a statement.
Analysts are skeptical of Bajaj Auto being able to sustain the premium vaulation.
“Considering moderation in the two-wheelers volumes due to macro headwinds and impact of duty hike in Sri Lanka on exports, we believe such premium valuation is not sustainable going ahead. We have a neutral view on the stock,” wrote Daljeet Kohli, head research at brokerage IndiaNivesh Securities Pvt. Ltd.
Bajaj’s Ravikumar said the launch of the new Pulsar and Discover models which command a premium price and improvement in export realizations because of currency benefits will help the company expand margins in the quarters ahead.
Mahantesh Sabarad, senior vice-president, equity, at Fortune Equity Brokers (India) Ltd, disagrees. There is no scope for the margins to improve further. Reduction in export incentives has been negating the gains the company could have recorded because of a depreciating rupee. Moreover, improvement in the two-wheeler sales in the months ahead will skew the sales mix in favour of two-wheelers, dragging the overall margins, he said.
With tax benefits for its factory in Pantnagar, Uttarakhand, coming to an end, Bajaj’s tax outgo rose to Rs.1,173.76 crore from Rs.1,040.67 crore a year earlier.
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First Published: Wed, Jan 16 2013. 11 43 PM IST
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