Bajaj Auto reports flat net profit

Revenues rise 7% to Rs 5,252 crore in the quarter

Sluggish domestic sales and a steep rise in expenses led to a flat net profit of Rs 740 crore for Bajaj Auto, India's third-largest two-wheeler maker, during the first quarter ended June 30. The Pune-based manufacturer of motorcycles such as the Pulsar and Discover and RE range of three-wheelers had posted a net profit of Rs 738 crore in the year-ago period. Analysts tracking the company had estimated Bajaj’s net profit for the June 2014 quarter to be Rs 815 crore. Bajaj’s stock on BSE reacted negatively to the earnings, closing at Rs 2,092, a 2.3 per cent decline compared to Wednesday’s close.

The company clocked sales of 988,430 units in the quarter, a growth of one per cent over 979,275 units in the same month in the previous year. The two-wheeler sector reported a growth of 14 per cent, according to the Society of Indian Automobile Manufacturers’ data.

The slight growth for Bajaj came primarily from exports where two-wheelers grew 33 per cent during the quarter. Exports account for 44 per cent of the total sales.

Domestic motorcycle sales slumped 14 per cent to 490,841 during the quarter. Bajaj Auto's sales dived in the volume segment where the company sells the Discover and Platina brands, reporting a fall of 26 per cent as Hero MotoCorp, Honda Motorcycle and Scooter India gained ground.

The firm lost a substantial market share in the motorcycle segment during the quarter, which stood at 18 per cent by the end of June compared to 23 per cent in June 2013.

Bajaj Auto continues to be absent in scooters, the fastest-growing two-wheeler segment recording a growth of 29 per cent in the first quarter, where Honda controls a lion’s share. One in every four two-wheelers sold is a scooter in India, compared to one in five two years ago. Arun Agarwal, automobile analyst at Kotak Securities, said: “Bajaj Auto’s first quarter revenues grew seven per cent and was on expected lines. But in the operating margin, there was some disappointment. The adjusted net profit came in slightly below our estimates.”

Adjusted earnings before interest, taxes, depreciation, and amortisation (Ebitda) margins for the quarter stood at 18.9 per cent (150 basis points lower year-on-year and 70 basis points lower quarter-on-quarter).