Bajaj Auto's net grows nearly 3-fold

Bajaj Auto recorded a near three-fold increase in net profit at Rs 475 crore in the quarter ended December 31, 2009, beating market estimates. India’s second-largest motorcycle maker saw high demand for its vehicles, essentially driven by the high-margin, but low-capacity bikes introduced recently.

The Pune-based company had recorded a net profit of Rs 164.27 crore in the same quarter in the previous financial year, when demand for new bikes came under fire due to tight monetary controls, inflation and the general economic slowdown. Net sales of Bajaj Auto grew to Rs 3,165 crore — an increase of 58 per cent, compared with Rs 2,004 crore reported in the same quarter a year ago.

Operating profit margin grew to 21.72 per cent in the reporting quarter as against 13.66 per cent during the corresponding quarter in the previous financial year. Bajaj Auto’s operating profit margin took the biggest knock in the industry last year. Compared with the 21.58 per cent margin in the preceding second quarter of the current year, the company has largely maintained its operating profit margin.

“This quarter witnessed an increase in cost of raw materials and components. Materials, as a percentage to operating income, rose sequentially from 66.2 per cent in Q2 to 68.5 per cent in Q3. However, due to higher volumes resulting in leveraging of fixed cost, effective cost management and focused sales promotional activities, operating Ebidta (earnings before interest, taxation, depreciation and amortisation) margin was maintained at 22 per cent during Q3,” Bajaj Auto said in a release.

New bikes, such as the Discover DTS-Si (a 100cc motorcycle) and the Pulsar 135 LS, helped shore up overall bike sales of the company, which stood at 711,991 units — an increase of 72 per cent above the 414,039 units sold in the previous year’s corresponding period. Exports, too, recorded a robust growth of 27 per cent at 273,902 units as against 215,233 units earlier.

The company also phased out some of the popular models it had created over the last couple of years or so and replaced it with better margin products.

Surjit Arora, an analyst at Prabhudas Lilladher, said: “The company has been able to control other expenses, despite a huge increase in cost of raw materials. In addition, the new 100cc bike has performed better than expected, with the company not having to spend too much on promotion. We believe that it will be able to sustain its margins in the upcoming quarters at around 19-20 per cent.”