Despite fall in volume, Bajaj Auto net rises 22%

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Published: October 24, 2019 2:31:07 AM

On the domestic market, Sharma hoped the festival season would be helpful and see a recovery that could sustain going ahead.

The company benefited from a tax reversal of Rs 182 crore in the July-September quarter.

Despite a 12% year-on-year decline in volumes, Bajaj Auto on Wednesday reported a 22% y-o-y increase in its net profit to `1,402 crore for the July-September quarter, aided by a one-time tax expense reversal due to recent reduction in corporate taxes. The profits beat the Bloomberg consensus estimates of Rs 1,153.43 crore. Lower tax and other expenses contributed to the company’s robust bottom line.
As the company managed to beat earnings estimates, the stocks rallied 3% to hit a more than 20-month high of Rs 3,217.10 during the afternoon trade. It closed 1.22% up at Rs 3,161.35 on the BSE.

Revenue from operations declined 4.09% y-o-y to Rs 7,707 crore, impacted by subdued volume growth amid a general weak demand condition. Operating profit margin dipped by 100 basis points to 16.6% on account of higher raw material and components cost as well as a rise in promotional schemes to boost sales. Consequently, the EBITDA declined 9.6% y-o-y to Rs 1,278 crore.

Raw material and components cost as a share of net sales grew by around 100 basis points, while tax expenses fell sharply to Rs 206.5 crore, compared with Rs 500.2 crore in the same quarter previous fiscal. The company benefited from a tax reversal of Rs 182 crore in the July-September quarter.

Domestic volumes declined 22% y-o-y to 11,73,591 units. Exports of 5.44 lakh units during the quarter contributed to around 41% to Bajaj Auto’s net sales, but the growth on a Y-o-Y basis was just 2%.

Rakesh Sharma, executive director, said Q2 was difficult to navigate, particularly July and August. “But we started to see some signs of revival in September itself and with a lot of dust settling down on discussion around tax cuts, things have improved,” he told a business news channel. On the domestic market, Sharma hoped the festival season would be helpful and see a recovery that could sustain going ahead.

Bajaj had 20% retail market share in the motorcycle segment during the second quarter. Mitul Shah, senior research analyst at Reliance Securities, said Bajaj Auto delivered a strong quarterly operational performance in 2QFY20 with healthy operating margin. “Looking ahead, we expect BAL to deliver better profitability and higher exports realisation. Post recent run up, valuation looks expensive. At present, we have ‘reduce’ rating on Bajaj Auto,” Shah said.

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