Bajaj Auto, India's second-largest two-wheeler maker, on Wednesday reported a 1% increase in profit after tax for the quarter ended June, when subdued domestic demand and disruption in exports took their toll on the company's performance.
It was the toughest quarter in recent times, company officials said, adding that an improvement is likely in the coming quarters.
The company reported profit after tax for April-June at 718 crore, up from 711 crore in the year-ago period. The net income grew at the slowest pace in 11 quarters, up 3.37% to 4,865 crore from 4,706 crore, due to sluggish volumes. Analysts said the company faces a rough road ahead. "The near-term outlook is challenging for Bajaj Auto, as sales in the domestic market are declining because of slowdown in demand and intense competition, and exports too will remain under pressure because of increase in duties in Sri Lanka and political unrest in Egypt," said Yaresh Kothari, auto analyst with Angel Broking. The company's numbers are below the brokerage house's expectations, Kothari said.
However, the company managed to stay in the vicinity of its stated target of 20% EBIDTA margins, posting 19.4% for the quarter, with a marginal improvement of 30 basis points.
"Considering that there were pressures of input cost, volatile currency and intense competition, attaining margins of 19.4% is good," Bajaj Auto's chief financial officer Kevin D'Sa told ET. "It was the toughest quarter in the recent times, but the forthcoming quarters will be much better, with new Discovers and Pulsars expected to draw higher volumes."
With two new products lined up for the domestic market and the situation in Sri Lanka and Egypt regaining normalcy, Bajaj is hoping to outpace the market growth of 7-8% this fiscal, D'Sa said. However, he admitted that meeting the sales target for the year would be tough, given the subdued market sentiment and the uncertain monsoon.
"Whatever we have lost in the first quarter, we won't be able to recover till the end of the year. It may be difficult to achieve the target of 5 million vehicles in 2012-13," said D'Sa. Ahead of the results, on Tuesday the share price had dropped almost 2% in anticipation of disappointing numbers. However, following the announcement on Wednesday, the share price recovered and closed 5.2% higher at 1,522.35 on BSE, in a flat market.
