Bajaj Auto Ltd on Friday reported a 3% rise in December quarter net profit, snapping out of a downward trend that lasted for four consecutive quarters up to September, on the back of higher three-wheeler and motorcycle sales in both overseas and domestic markets.

Net profit at the maker of Pulsar and Discover motorcycles rose to Rs952.44 crore in the three months ended 31 December from Rs924.62 crore a year ago, the company said in a statement to BSE. Net sales rose 18.7% to Rs6,246.23 crore from Rs5,262.8 crore a year earlier.

The Pune-based automaker was expected to post a profit of Rs1,025.8 crore on net sales of Rs6,106 crore, according to a Bloomberg survey of three analysts.

Sales for this fiscal year are not comparable to the previous year’s earnings because they are disclosed net of the goods and services tax introduced in July, Bajaj Auto said in the statement.

The company’s motorcycle volumes during the quarter (including exports) advanced by 9.3% to 818,510 units over the same period a year ago while total three-wheeler sales jumped 78.2% to 182,959 units, led by the domestic market.

Bajaj Auto’s Ebitda (earnings before interest, tax, depreciation and amortization) margin, a measure of operating profitability, narrowed to 20.6% in the quarter from 22% a year ago.

Analysts warn against comparing December quarter financials with the year-ago quarter owing to the base effect created by demonetization which weakened sales and production.

Nevertheless, margins and net profit came in lower than expected owing to lower investment income and higher promotion expenses, they said, while conceding that revenues surpassed market estimates.

“Revenues were above our estimates due to healthy domestic realization," said Bibhishan Jagtap, an analyst at brokerage house IDBI Capital Markets and Securities Ltd, in a note. Net profit, led by a higher tax rate, was below estimates, as were Ebitda margins, he added.

Margins were further crimped by higher expenses on raw materials including steel, aluminium and lead, since raw material costs as a percentage of sales in the quarter rose to 63.6% from 56.8% a year ago. They could have shrunk further if not for a richer product mix of three-wheelers and premium motorcycles.

The average realization per unit during the three months to December grew 7% to Rs63,600 from Rs59,400 in the year-ago period, according to S. Ravikumar, president of business development and assurance at the firm.

In the domestic three-wheeler market, Bajaj Auto outperformed its peers with a doubling of volumes to 110,123 units during the quarter but marginally fell behind in the overseas market while still remaining India’s top exporter, growing 48.4% to 72,836 units over the previous year.

According to data from industry body Society of Indian Automobile Manufacturers, Bajaj Auto’s domestic bike sales have lagged behind India’s broader motorcycle market, which grew by 14.8% to 2,851,776 units during the quarter. The company’s sales were almost flat at 466,431 units in the same period.

The export performance was encouraging with a 21.6% jump to 352,079 units during the quarter, though broader bike exports grew at 27.9% to 619,610 units.

“New markets such as the Philippines, Nigeria and Bangladesh contributed close to half of overall export volumes for the fiscal so far and are expected to gain traction as they stabilize over the next two to three years," said Ravikumar.

The company expects to export close to 1.7 million units in FY18, he added, down from the 1.8 million units target announced in the September quarter.

On the domestic front, Ravikumar believes the company has filled the gaps in its “slightly weak" product range with the launch of two Discover and Avenger bikes in early January. The Discover 110 and 125 are fresh launches, placed in the executive segment, whereas the refreshed Avenger Cruise 220 and Street 220 are premium bikes.

“The CT, Platina, Pulsar and KTM bikes led volumes during the December quarter. Our volumes and market share will be helped further by the newly launched Discovers and Avengers, as was reflected in January sales," he said.

Up to the December quarter, Bajaj Auto’s market share in the domestic motorcycle market was 16.4%. The firm aims to exit FY18 with a 24% market share.

On Friday, Bajaj Auto shares closed at Rs3,242, down 4.9% on BSE, while the benchmark Sensex ended 2.34% lower at 35,066.75 points.

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