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Bajaj Auto Q2 net beats estimates, but sales down

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Riding high on its premium range of motorcycles and better cost management, Bajaj Auto, India’s second-biggest bike producer, beat estimates with a two per cent increase in net profit at Rs 740.7 crore for the quarter ended September 30.

The Pune-based company, which had posted a net profit of Rs 725.8 crore during the same quarter last year, said its turnover for the reporting quarter slipped on account of a 10 per cent drop in sales volumes.

Market estimates by analysts tracking the company had suggested a net profit in the region of Rs 725-730 crore.

Bajaj Auto recorded 10 per cent lower vehicle sales at 1,049,208 units as compared to the same period last year (1,164,137 units), hit by a subdued domestic market demand and sliding export volumes.

Internal costs efficiencies resulted in 3.5 per cent reduction of total expenses to Rs 4,098 core

The company, consistently posting 20 per cent earning before interest, tax, depreciation and amortisation margin every quarter, posted a marginal slip this time at 19.7 per cent. However, on a sequential basis, its margins improved from the 19.4 per cent reported in Q1.

Despite the dip in sales volumes in the July-September period, the absence of valuation loss on derivative hedging instruments during the quarter, there in the comparable quarter last year, helped the company post a rise in net profit.

"The quarter was a challenging one for the industry at large. The motorcycle industry, which witnessed a CAGR of 15 per cent over last four years, witnessed a decline of nine per cent in the quarter. Added to this were the overall inflationary pressures, rise in input cost and depreciating rupee forcing the government to raise fuel prices", said the company.

New, high-margin products such as Pulsar 200NS, KTM Duke 200 and Pulsar 135LS have witnessed a positive growth in demand. The company is the largest manufacturer of premium commuter bikes in the country.

"The company’s strategy to focus on the high-end motorcycle segment of the market, together with its variable cost structure, ensured that in a subdued market there was no negative impact on operating leverage", said the company.

While domestic sales volumes of two-wheelers were down 12 per cent to 601,876 unit exports were lower five per cent. Exports were hit primarily due to slump in volumes in Sri Lanka. Three-wheeler exports were down 22 per cent to 63,637 units.