Bajaj Auto net clocks 28% increase in Q2

Bajaj Auto net clocks 28% increase in Q2

India’s second largest two-wheeler maker Bajaj Auto Ltd said net profit for the second quarter ended June improved a better-than-expected 27.83% from a year ago, riding on higher-margin motorcycle sales and gains posted by its insurance units.

Bajaj’s net profit in the quarter rose to Rs366.5 crore from Rs286.7 crore a year ago. This figure includes the profits of its insurance subsidiaries.

On a stand-alone basis, the automotive operations declared a net profit of Rs336.4 crore, up 6% from the year-ago quarter. The increase, after two straight quarters of decline, beat analyst estimates. Five analysts polled by Mint ahead of the results had predicted an average Rs279.64 crore net profit.

Sales at Bajaj Auto increased about 1.8% to Rs2,583.3 crore in the quarter, up from Rs2,538.8 crore the same quarter last year. Bajaj fared better than rival Hero Honda Motors Ltd, which saw its net profit decline 5.4% over five straight quarters ended September.

Analysts, however caution that Bajaj’s margins would come down in the third quarter, largely because of its Rs4,000 discount on the 100cc bike Platina as well as a higher marketing spend in the festive season. Bajaj Auto closed at Rs2,511.65 a share on Friday on the Bombay Stock Exchange, up 2.07% from the previous day’s close.

“Compared to 13 times their earnings a few months ago, the Bajaj stock today is performing at 15-16 times its earnings. Both Hero Honda and Bajaj stocks have gained compared with some of the other big companies," said an analyst with a leading international brokerage who did not wish to be identified.

This is the third weak quarter in volumes growth for Bajaj as overall sales fell 13%, though growth in realization was 11.8% year-on-year.

Bajaj’s executive director Sanjiv Bajaj blames lower volumes on two factors. “Our volumes have been impacted because consumers deferred their purchases in expectations for our new bike XCD, while there has also been a credit crunch in the market," he said on telephone.

Premium segment sales rose 16% even as 100cc bike sales fell 22%. The company has achieved its first-month sales target of 18,000 XCD bikes. Bajaj said advance bookings already cover the October production target of 50,000 units.

A feasibility study with France’s Renault SA on making a small car in India should be ready within two months, Bajaj said.

Ravi Krishnan in Delhi and Reuters in Mumbai contributed to this story.