16-Oct-2013
Bajaj Auto Ltd ’s second-quarter profit rose by a higher-than-expected 13% as India’s second largest motorcycle maker benefited from a weak rupee that boosted export earnings to a record, countering a sales decline in its home market.
Net profit rose to Rs.837.16 crore in the three months ended 30 September from Rs.740.67 crore in the year-earlier period, the company said on Wednesday. That compared with expectations of a profit of Rs.809.6 crore, based on a Bloomberg survey of analysts. Net sales rose 5.06% to Rs.5,061 crore from Rs.4,817.07 crore.
Exports received a boost from the rupee’s 5.15% depreciation against the dollar in the quarter, and rose 26% year-on-year to an all-time high of Rs.2,125 crore.
The export performance helped the company offset the decline in sales by volume in the domestic market, where demand for cars and bikes has slumped on account of slowing economic growth, higher fuel prices and high interest rates on auto loans.
The company’s total sales—motorcycles and commercial vehicles combined—dropped 8% to 961,330 units in the three months to September from the year-ago period.
The owner of the Pulsar and Discover motorcycle brands also reported a record operating margin in the September quarter—23.1% against 18.7% in the year-ago quarter.
Strategic initiatives to enter overseas markets, including Africa, are delivering results, the company said in a statement. A focus on high-margin models also paid off.
One out of three motorcycle models manufactured by the company turns in an ebitda (earnings before interest, tax, depreciation and amortization) margin in excess of 20%. As a result, Bajaj has been able to achieve a break-even with low sales volumes.
Bajaj’s motorcycle sales dropped 11% to 1,078,127 units in the six months to September from 1,220,365 units in the same period a year ago. Its marketshare also fell to 21.5% from 24% a year earlier as competition intensified.
Motorcycle sales in the domestic market remained almost flat with 5.01 million units sold in the first half compared with 4.97 million units a year ago, according to Society of Indian Automobile Manufacturers (Siam).
In a bid to recoup the ground it has lost to rivals Hero MotoCorp Ltd and Honda Motorcycle and Scooter India Pvt. Ltd, Bajaj plans to launch two more new models in the mass commuter category, a segment that accounts for the bulk of motorcycle sales, by the end of the current fiscal, Mint reported on 16 October. Bajaj launched the Discover 100M in Pune on 15 October.
“Bajaj is likely to sustain the good performance in the months ahead with improving volumes in both the domestic and exports markets,” Mitul Shah, an analyst at Karvy Stock Broking Pvt. Ltd, said.
Others too are bullish on Bajaj’s prospects. In a 9 October earnings preview report, Goldman Sachs Equity Research estimated Bajaj to turn in an ebitda margin of 15% by the end of 2013-14.
The margin is likely to expand 100 basis points (one basis point is one-hundredth of a percentage point) year-on-year on account of strong export demand. “Despite weaker end-consumer demand, company has been able to consistently deliver top quartile cash returns across the cycle indicating strong management execution and product strategy,” the report said.
As on 30th September, Bajaj had surplus cash and cash equivalents of Rs.6,516 crore.
On Tuesday, Bajaj Auto’s shares fell 0.66% to Rs.2,124.15 on the BSE as the benchmark Sensex fell 0.29% to end at 20,547.62. The stock market was closed for a holiday on Wednesday.
Source:- livemint.com
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