Export growth lifts Bajaj Auto's Q2 net profit by 13%

Bajaj Auto, India's second-largest motorcycle maker by sales, reported a second-quarter profit that beat analyst estimates as a weaker rupee gave export earnings a boost.

Bajaj, which competes at home with Hero MotoCorp and TVS Motor, is pushing into overseas markets including Africa and has benefited from the rupee's recent decline to all-time lows against the dollar.

Export revenue, which accounts for more than a third of Bajaj's total sales, rose 26 per cent in the quarter ended September compared with a year earlier, the company said on Wednesday.

That boosted net profit by 13 per cent to Rs 837 crore. The mean estimate of 11 analysts was Rs 819 crore, according to Thomson Reuters I/B/E/S.

"Over the last five years, strategic initiatives taken to enter into difficult markets, like Africa, are yielding rich dividends. The benefits are now enhanced with the depreciating rupee," Bajaj said in a statement.

Second-quarter sales in volume terms fell 8 per cent, but an 11 per cent decline in the value of the rupee versus the dollar meant sales in dollars brought in more revenue when converted into rupees.

By value, revenue rose 5 per cent to Rs 5,061 crore, compared with the analyst estimate of Rs 4,923 crore.

Operating margin - the widest in the industry - was 23.1 per cent from 18.7 per cent.

Bajaj is India's biggest exporter of two-wheeler vehicles and three-wheelers such as tuk tuks.

"Bajaj has already created a strong brand in Africa and Latin America, which in our view will drive its future export growth," brokerage Esperito Santo said in a recent note.

The two-wheeler segment, which includes motorcycles and scooters often used as family vehicles in India, is the only domestic auto segment to register sales growth this fiscal year started April 1, as high borrowing and fuel costs discourage purchases.

Automakers expect recovery in the September-December festive season during which time many Indians consider it auspicious to buy big-ticket items such as gold and vehicles.

Strong monsoon rains could also spur future vehicle demand, especially for motorcycles and scooters in rural areas, because incomes often rise after good harvests.

Shares of Bajaj Auto closed 0.6 per cent lower on Tuesday at Rs 2,125.65 but are 21 per cent higher than a year ago compared with 11 per cent for the benchmark stock index. Indian markets are closed on Wednesday.


Copyright Thomson Reuters 2013