Bajaj Auto Ltd.’s strong January-March results followed blow-out sales in 2010, but analysts say investors should gird for a year of consolidation given that the company's profitability is possibly at a peak.
- Adeel Halim/Bloomberg News
- Fiscal 2010-11 was a very strong year for Bajaj Auto as it sold 35% more motorcycles than it had the previous year.
The motorcycle maker Wednesday said its January-March net profit more than doubled to 14 billion rupees ($311 million), boosted by a one-time tax pre-payment surplus. Stripped of one-off items, the company’s net profit was in line with analysts’ estimates of 6.49 billion rupees.
The results failed to excite investors. Bajaj Auto's stock, which re-entered the 30-company Sensex in October 2010 after losing its place in March 2008, fell 1.7% Wednesday. In early afternoon trade Thursday, it was up 1.1% at 1,300.90 rupees, while the Sensex was 0.2% higher.
Bajaj Auto managed to keep its fourth quarter operating margin above 20%, even though rising raw materials costs have crimped auto makers' profits. The company is easily the most profitable motorcycle maker in India, consistently maintaining margins above 20% over the past few quarters.
Larger rival Hero Honda Motors Ltd.’s fourth quarter profit margin was 15.4%, while TVS Motor Co. Ltd.'s profit margin was way down at 5.6%.
But analysts are wondering if there is any scope for Bajaj Auto to squeeze more profit from its operations. In a post-earnings [...]
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