Cumulatively, the first half has seen little of its earlier sparkle. The disappointment is writ large for the two wheeler major, what with both topline and bottomline growth actually stagnating. Importantly, the company has posted sales of nearly 6.31 lakh units, which marks a 7.64 per cent drop in volume sales over last year. In line with this, revenues at Bajaj Auto have increased a mere 1.47 per cent to Rs 1,717.32 crore, thanks largely to higher realisations from its new product launches and the company's gradual shift to premium vehicles.

An area of worry for Bajaj Auto could be the dwindling margins. Operating margins for the second quarter have dipped from 17.01 per cent to 15.05 per cent. The dwindling margins have continued from the first quarter when they had fallen from 16.49 per cent to 14.79 per cent. Company sources attribute this to increased material costs, a new wage agreement signed by the company and increased advertising for new product launches, all of which have played an integral role in eroding the two wheeler major's margins.

This aside, net profit at Bajaj was also stagnant for the first half at Rs 248.48 crore (Rs 243.04 crore last year). This was inspite of the the company's debt-free status (with only an interest free loan from SICOM) which has helped reduce the interest burden to a mere Rs 1.00 crore and thus buoy earnings. The quality of earnings in the first half at Bajaj is also reflected in the fact that other income as a percentage of profit before tax stands at 47.56 per cent (37.15 per cent last year). But it would be prudent to mention here that the company's huge other income component of Rs 168.10 crore is in essence recurring revenue from treasury operations of the company.

But despite a disappointing first half and the fact that while Bajaj might have been slow to respond to changing market trends in the past, it has now definitely got its act together. The company is now ready to claw back its lost market share with a host of new product launches. In fact, the company is slated to invest nearly Rs 850 crore in the next few years for new product launches and capacity expansions. Of this, Rs 350 crore will fund the design and development of new models, with the rest going towards the expansion of its manufacturing plant located at Aurangabad. Through this investment, Bajaj hopes to roll out 10 new models, with a special emphasis on the motorcycle segment.

The company's strategy now seems intent on having a product, to suit every need - the Classic SL, Chetak and Super will cover the range in scooters. While in motorcycles, Bajaj will be represented in almost every segment starting from the low end M-80 to the stylish and high powered-segment with the 110 cc Mercury and the upmarket 175 cc Eliminator. Also, with the third plant at Chakan near Pune, Bajaj's total production of two and three wheelers, could well touch the 2 million vehicle mark. A corollary of which would be the enormous pricing cushion that the company would enjoy, due to the truly world scale of operations and the resultant lower costs. All of which points towards a re-rating of the stock from the current level of Rs 466.