Bajaj Auto’s profit growth robust, margins stable

The sales of Bajaj Auto, the Rs 38,200 crore market capitalisation motorcycle company, for the quarter ended 31 December 2010 at Rs 4,177 crore, based on standalone figures, are almost at the same level as the previous quarter. Sales are up by 27% over the same period a year ago.

On a sequential basis, its net profit is down by 2% to Rs 667 crore but is up by 40% over the same period, a year ago.
Despite rising raw material costs, Bajaj Auto has maintained stable margins. The operating profit margin is healthy at 20%, for this quarter, almost same as that of the previous quarter, and up by 11 basis points from Q3 FY09-10. 100 basis points make 1%. The net profit margin at 16% for Q3 FY10-11, is marginally up from 15% for Q2 FY10-11, and 150 basis points greater than 14.4% for Q3 FY09-10.

In motorcycles, the company’s growth is primarily driven by the domestic market, with sales rising by 23% to 6 lakh units in the quarter ended December 2010, compared to the same period a year ago. Exports rose by 7% to 2.4 lakh units. Volumes rose 72% in this segment.

Bajaj’s product mix is tilting more towards premium products, a sign that the company’s strategy is working. Pulsar, with a market share of 50% in the sports segment, recorded its highest sales of 2.6 lakh units. 3.3 lakh units of Discover were sold during the quarter. Around 70% of the sales are accounted for by high-end motorcycles, Pulsar and Discover. This has also helped improve realisations and protect margins.

The overall market share of the company is 31% this quarter. This is an increase from the market share of 27% in the year ago period, but is down from 34% in the September quarter.

In other developments in the quarter, in November 2010, Bajaj Auto International Holdings purchased additional 244,600 shares in KTM power sports taking its total shareholding in the same to 38%. The first of their jointly developed racing bikes is set to hit the European market in 2011.

The share price of the company has increased to Rs 1320, up by 2% from the previous day’s close on Wednesday, when its results were declared. Today, it is down by about 1.6% at the time of posting.

Read the press release from Bajaj Auto and see its financial results for the December quarter.

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