Bajaj Auto Q2 net jumps, maintains sales outlook

Bajaj Auto Q2 net jumps, maintains sales outlook

Bangalore: Bajaj Auto, India’s No. 2 motorcycle maker, posted a 69% jump in quarterly profit on Tuesday and demand is expected to remain robust on the back of festivals when sales usually rise.

The maker of top selling motorbikes such as the Pulsar and the 100cc Discover, behind Hero Honda Motors, maintained its target of selling 4 million vehicles in 2010-11 as production constraints limited output.

Its shares, valued at $9.9 billion, fell 0.6% in a subdued Mumbai market as investors locked in profits after they had run up more than 70% in the year to date.

Analysts said operating margins in the December quarter could come under pressure due to volatile commodity prices.

Bajaj said net profit jumped to 682 crore ($153.6 million) in its fiscal second quarter ended September from 403 crore a year earlier. “Overall, it has been a good quarter. The margins are better than expected. But sustainability is a question. We have to see if it can maintain these margins in the coming quarters," said Vaishali Jajoo, auto analyst with Angel Broking.

Bajaj said operating margin stood at 20.7% in July-September, up 70 basis points from the June quarter. It stood by its outlook for a 20% operating margin for the full year ending March 2011.

Automakers are riding rising demand in India as a rapidly expanding economy boosts incomes and consumer spending, and companies are unable to step up output quickly due to shortage of component suppliers.

“Q3 will again be a good quarter because of festive demand," Jajoo said, referring to Diwali, the festival of lights, when most workers in India get their annual bonuses.

Sales at Bajaj rose almost 50% to 4,181 crore from 2,793 crore last year, while volumes climbed 46%.

Shares in Bajaj Auto have risen nearly 73% so far this year, compared with 31% gain for the sector index and the main stock index that is up 15.5%.