High-end bikes turn it on for Bajaj Auto, net up 40% in Q3

BAJAJ Auto beat analysts’ estimates to post a 40% rise in net profit during the third quarter as volume growth and higher prices boosted sales.

Rising raw material costs may put pressure on the margins, going forward. But its focus on highend products will help maintain profitability, analysts said.

Net profit for the quarter ended December jumped to 667 crore from 475 crore and sales grew 28% to 4,277 crore from a year earlier, India’s second-biggest motorcycle maker by sales said. “The quarter witnessed an all-round increase in input costs. In this challenging environment, the company’s focus on high-end motorcycles enabled it to maintain record high margins in excess of 20%,” the company said in a statement. Currently, high-end motorcycles contribute over 70% of its total motorcycle sales.

The company’s domestic sales of motorcycles, including the Pulsar and Discover, rose 23% in the quarter as a buoyant economy, rising disposable incomes and a need for personal mobility spurred consumer spending. The company’s shares gained after the results to close about 2% higher at 1,319.85 on the BSE. The stock gained 49% during the past one year owing to rising margins and volume growth.

While the rural initiative and new products in the pipeline will make an immediate impact on the company’s business and market share, concerns on rising input costs are expected to impact margins. Bajaj Auto holds a 27% share in the twowheeler market, dominated by Hero Honda, with a 54% share. The new initiative of appointing close to 135 dealers in the mini-metros and smaller towns will help Bajaj tap the huge potential in rural India much better.