Bajaj Auto beats profit estimates, but fails to impress analysts

Bajaj Auto reported a better-than-expected 10.5 per cent increase in quarterly net profit, but analysts were disappointed with the quality of earnings. Foreign exchange gains and higher other income component helped the bottom line.

Bajaj Auto's net profit for the October-December quarter was Rs 905 crore against an NDTV poll of Rs 870 crore, helped by forex gain of nearly Rs 100 crore during the quarter.

Nitesh Sharma of Espirito Santo Securities said adjusted ebitda margin of 20.3 per cent was 200 basis points lower quarter-on-quarter because of the deterioration in the product mix.

"Contribution from premium segment in volumes declined from 37 per cent to 28 per cent q-o-q," he said.

The motorcycle maker posted sales of Rs 5,024 crore in the third quarter against expectations of Rs 5,200 crore. Export revenue rose 23 per cent in the quarter from a year earlier although total sales in volume terms fell nearly 12 per cent. Exports contribute more than a third of sales for Bajaj Auto.

Prayesh Jain, AVP (research) at domestic brokerage IIFL, told NDTV that there is no case for upgrading Bajaj Auto because the company has been losing market share in the domestic motorcycle segment.

"It's only the export story that's going on so far but even in markets like Nigeria and Sri Lanka the scenario is not very exciting in terms of growth. We prefer Hero to Bajaj," he added.

Bajaj needs to bring in a new brand to drive growth, he said.

Bajaj Auto currently owns successful brands such as Discover and Pulsar.

Shares of the company, which is India's biggest exporter of two-wheeler vehicles and three-wheelers, closed up 0.7 percent at Rs 1,908 in a Mumbai market that fell 0.1 per cent.

(With inputs from Reuters)