Bajaj Auto net jumps four-fold

Predicts cooling in raw material prices.

Pune-based Bajaj Auto, the country’s second biggest two-wheeler maker, today reported a four-fold increase in net profit at Rs 528.65 crore for the fourth quarter ended March 31, over the same quarter last year.

Net profit in the year-ago quarter was Rs 130.21 crore, after the company reported a slump in sales following the economic turmoil that crippled demand.

Strong demand for the newly-launched cost-effective models, including the Discover DTS-Si (a 100cc bike) and the Pulsar 135, and an overall lower tax outgo, primarily from its tax-free plant in Pantnagar, Uttarakhand, allowed the company to beat analysts’ forecast. Analysts had expected Bajaj Auto to report a net profit of Rs 511 crore.

Rajiv Bajaj, managing director of Bajaj Auto, said, “We have priced our newly-launched Discover and Pulsar models at a premium to the competition which has yielded the desired result. I do not see any reason why it is not possible to maintain a margin which can be above or around 20 per cent for 2010-11.” The company’s board recommended a 400 per cent dividend, or Rs 40 per share which would mean a total dividend outgo of Rs 675 crore.

Bajaj Auto shares reacted positively and closed 1.02 per cent higher at Rs 2,145.70 on the Bombay Stock Exchange. Bajaj Auto sold 8,08,973 units of two- and three-wheelers during the quarter, an increase of 83.74 per cent over 4,40,269 units sold in the corresponding quarter last year. Net sales rose 73.34 per cent to Rs 3,290 crore from Rs 1,898 crore in the year-ago period. Operating margin grew 22.9 per cent from 14.2 per cent.

The company predicts that the current surge in commodity prices, including that of natural rubber, essential for tyre making, will cool-down in the coming months due to softening of overall demand at the retail level.

“Demand for motorcycles has already softened by 10 per cent, but we do not see further correction in this. This will put pressure on demand for products, which will in turn force raw material prices to go down on subdued demand from manufacturers,” added Bajaj.

Raw material costs, as a percentage of gross sales, increased to 67.25 per cent in the reported quarter from 59.67 per cent in the first quarter of the same year. Bajaj Auto consumed raw materials worth Rs 2,337 crore. Bajaj also said that high cost of raw materials could be offset to some extent by high-margin bikes like the Pulsar range and increased overall sales. The company is targeting sales of four million units of two- and three-wheelers by the end of 2010-11.

Last year, Bajaj Auto improved its market share in the motorcycle segment to 33-35 per cent from 26-27 per cent in 2008-09. It hopes that the domestic two-wheeler market would reach 10.8 million units by the end of 2010-11.

The company hopes to sell 3.6 million units of motorcycles and about 4 lakh of three-wheelers in 2010-11. It launched a new 150cc Discover motorcycle on Monday, priced at Rs 46,000.