Bajaj Auto, the second-largest motorcycle manufacturer, on Wednesday reported a 13% year-on-year rise in net profit for the September quarter, driven mainly by solid export realisations.
The profit stood at Rs837 crore for the period under review.
Talking about value terms, sales skidded 8% on-year to 9,61,330 units. But that didn’t deter the automaker from maintaining its earnings before interest, taxes, depreciation, and amortisation (Ebitda) well over its target of 20% at 23.1% as against 18.7% in the corresponding period last year.
There are several factors at work. According to S Ravikumar, senior vice president - business development and assurance, Bajaj Auto, the company gained handsomely from strong sales of high-margin products like Pulsars and three-wheelers. Even a higher contribution from international sales kept margins for the company in nice shape.
“International business now accounts for 40% plus for the business and has done extremely well during the quarter, especially in August and September. In addition, big benefits came from the depreciation of the rupee,” said Ravikumar.
Taking it further, the company is hashing out options to gradually step up the share of revenues from international business. “We are looking at a contribution of 50% from international business in the next 1-2 years,” he said.
The average realisation came in at Rs60.9 per dollar during the quarter as against Rs55.6 in April-June and Rs50 a year earlier.
The company is hopeful of maintaining the target of 20% margin despite its higher focus on entry level bikes. According to Ravikumar, the newly launched Discover 100M has been received well in the market and will help in maintaining volumes for the rest of the fiscal. “We will never take our eyes off 20% Ebitda. Aided by new launches, the second half of the year should give us good numbers,” he said.
Clearly, for analysts, the numbers are ahead of expectations. “Bajaj Auto Q2FY14 operating performance was ahead of estimates by 6% and ahead of consensus by 16%, on higher than anticipated currency and product mix benefits,” said Emkay Global Financial Services.
“The export performance helped the company offset the decline in volumes in the domestic market. Considering the weak sentiments towards the premium motorcycle segment, the focus of the company for FY14 would be on the commuter segment i.e. Discover brand,” said Rikesh Parikh, VP - institution corporate broking, Motilal Oswal Securities.
There’s a general feeling among auto manufacturers that a recovery in sales is on the way with the onset of the September-December festive season when many consider it auspicious to go for big-ticket purchases. Even a strong monsoon has buoyed their hopes as it would lead to a higher disposable income in rural areas that would spur future vehicle demand.