Weak demand and adverse product mix impacted Pune-based Bajaj Auto, India’s second biggest two-wheeler manufacturer, to post a 0.77 per cent dip in net profit for the quarter ended March 31, 2013.
The company reported a net profit of Rs 766 crore for the quarter as compared to Rs 772 crore posted in the quarter previous to last. The fall in net profit was the first in four quarters for the two and three wheeler producing company.
Higher contribution of other income arrested further fall in net profit during the quarter. Other income rose Rs 244 crore, an increase of 74 per cent as against Rs 140 crore.
Operating margins, which has been consistently held in the region of 20 per cent by Bajaj Auto during the past several quarters, slipped to 17.6 per cent during the reporting quarter. In the corresponding quarter last year, it posted 19.8 per cent and 18.6 per cent reported in the third quarter last year.
While net profit stood in line of expectations of analysts, margins were below estimates said brokerage houses in their report. “The EBITDA margin declined 217bp yoy (107bp qoq) to 17.6 per cent, below our expectations of 18.6 per cent, mainly due to adverse product-mix and increase in other expenditure,” said Yaresh Kothari, research analyst- automobile, Angel Broking.
Net sales for the quarter stood at Rs 4,651 crore, a growth of 3 per cent as compared to Rs 4,515 crore posted in the same quarter a year ago. However, there was a 3.53 per cent fall in sales to 981,242 units as against 1,017,167 units during the two quarters.
The company though declining to give sales guidance for the year, however said that it does not see any growth in volumes in the short term. Weakened demand and increased competition, especially from Honda, is expected to put pressure on Bajaj two-wheeler sales growth, added analysts.
But despite slackening demand, Bajaj Auto is not holding back any launches. The company is launching six new models with the Discover brand, starting July. About four of these launches will be in the price bracket of Rs 40,000-Rs 50,000 while the other two will cost more than Rs 50,000.
S Ravikumar, senior vice president (business development and assurance), Bajaj Auto said, “With the Discover, we have made multiple cuts in the entry level segment. The brand has gained good traction in the market. The focus now would be on the Discover in the current financial year.”
The company is hoping to gain positively from exports this year and has thus changed its forward contracts to Rs 54 level per dollar as against Rs 49 level maintained last year. Exports presently contribute 33 per cent of the company’s sales and revenue.
In addition, raw material prices too has remained soft in the past few months and are not expected to go higher from current levels, said Ravikumar.
Moreoever, Bajaj and Japanese partner Kawasaki will kick-start sales and production plans for Bajaj models in Indonesia in the second quarter this year. One of the first products to be shipped to Indonesia could be the Pulsar 200NS.