One-offs take sheen off Bajaj Auto's Q2

The firm hopes an increase in its Discover portfolio sales will improve sluggish domestic show

Bajaj Auto's September quarter results were a tad lower than expectations. Compared with Bloomberg consensus profit estimate of Rs 866 crore, the adjusted net profit stood at Rs 853 crore. Reported net profit was at Rs 591 crore, down 29 per cent year-on-year (y-o-y), largely due to the Rs 340 crore levy, including interest and penalties on account of the National Calamity Contingent Duty. The company, unlike its peers like Hero MotoCorp which has been paying this since 2011, had not provided for the same and thus will be liable to pay the duty for seven and half years starting April 2007. The recurring charge on this account will be about Rs 3 crore a month.

The positive takeaway from the result has been the top line performance and realisations. Aided by higher volumes and improving product mix, sales increased 15 per cent y-o-y. Higher exports, three-wheelers as well as Discover sales aided realisations, which were up about five per cent over the year-ago quarter and 6.3 per cent on a sequential basis. Three-wheeler sales (up 40 per cent y-o-y) as a percentage of overall volumes have increased to 14.8 per cent in the September quarter, from 11.7 per cent a year ago. Exports, too, have been strong growing 29 per cent y-o-y and now contribute about 49 per cent to the overall volumes. The June number was 45 per cent.  

Volumes were up 10 per cent y-o-y, crossing the one-million mark after a gap of six quarters. Analysts have pegged the number close to the 1.3 million in the December quarter, as the company benefits from the higher festival sales.

The company reported margins of 20.8 per cent adjusted for mark-to-market forex loss of Rs 67 crore and corporate social responsibility contribution of Rs 21.7 crore. Adjusted margins are broadly in line with analyst estimates.

The worry continues to be on the domestic front, as the company has been losing share to its competitors. As three-wheeler volumes are expected to be strong, analysts expect domestic volumes to be flat or slightly lower y-o-y this year. The muted growth of its premium bikes and the delayed launch of Discover 150 by a month or so could peg back FY15 volumes.

Domestic sales volumes have seen a muted trend through the past two financial years, with FY13 posting a two per cent decline, and FY14 showing 2.4 per cent growth.