Bajaj Auto 1Q Net up Less Than 1%; Weak Demand Hurts
07/18/2012| 04:37am US/Eastern
Recommend:
--Sales rise 4%, volumes down
--Share price up 2.6% on sales growth
--Company says planning new launches to boost demand
(Adds earnings details in the 10th-13th paragraphs, share price in the 8th paragraph and analyst's comments in the 7th, 9th paragraphs)
By Anirban Chowdhury
MUMBAI--Bajaj Auto Ltd. (532977.BY) said Wednesday its April-June net profit rose less than 1% because of a fall in overall sales volume as high fuel prices and interest rates crimped demand for new vehicles in India.
India's second-biggest motorcycle maker by sales posted a net profit of 7.18 billion rupees ($129.93 million), up from INR7.11 billion a year earlier.
Sales rose 4% to INR47.14 billion as the company sold higher-priced vehicles. But sales volume slipped to 1.08 million vehicles from 1.09 million a year earlier due to lower demand.
A Dow Jones Newswires poll of five analysts expected the Pune-based company to post a net profit of INR7.26 billion on sales of INR47.80 billion.
"The numbers are more or less in line with my estimates...as far as exports are concerned the company has hedged at INR51 to a dollar which will likely grow to INR54 to a dollar in the next financial year. That will give it some benefits," said Surjit Arora, an analyst with Prabhudas Lilladher. He added he maintains an "accumulate" call for the company's stock. The rupee was last trading at INR55.26 to a dollar.
Bajaj's share price was up 2.6% at INR1,484.10 during afternoon trading, largely in line with the benchmark Sensex that was up 2.59%.
"Given the weakness in overall sentiment, the rise in the company's sales have come as some relief," Arora said.
The demand slowdown in India, once one of the world's fastest growing automobile markets, was initially limited to passenger cars but has now spread to two-wheelers, typically the most popular mode of personal transport in India, due to their cheaper price-tags and easy driving in the country's crowded roads.
Bajaj, which trails Hero MotoCorp Ltd., sold 618,489 motorcycles locally during the April-June quarter, 1% lower than a year earlier. Exports grew 7% to 364,134 units.
Bajaj said sales in its biggest 125 cubic centimeter-150 cubic centimeter segment, in which it sells its top-selling Discover model, declined by 16%, whereas industry sales in the segment grew by 3%. The company said it hopes to arrest this decline through new launches planned for the year. It didn't elaborate.
Bajaj spent INR32.01 billion on raw materials, up from INR31.75 billion rupees a year earlier.
Write to Anirban Chowdhury at anirban.chowdhury@dowjones.com
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