Bajaj Auto Q2 profit down

Bajaj Auto Q2 profit down

Bajaj Auto Ltd., India's second-biggest motorcycle maker, reported an 11.3 percent drop in quarterly profit on Wednesday as higher costs dented margins in the world's largest market after China.

After the results, which were below market forecasts, Bajaj's shares fell 2.4 percent to 981.25 rupees on the Bombay exchange, while the benchmark index fell 0.7 percent.

Bajaj, which uses technology from Japan's Kawasaki Heavy Industries Ltd. for some models, increased motorbike sales by 34.5 percent in July-September to 336,425 units, better than the industry's 18.8 percent sales rise.

But earnings growth was hurt by a sharp increase in prices of raw materials such as steel, plastics and rubber as well as stiff competition that forced it to offer discounts in the $4 billion market. Other income, mainly returns from investments, also fell.

Bajaj, which also makes scooters and dominates the market for three-wheeled motorised rickshaws, said net profit dropped to 1.79 billion rupees ($39 million) in its second quarter to the end of September from 2.02 billion a year ago. The median profit forecast in a Reuters poll of 12 analysts was 1.91 billion.

Bajaj's sales, net of excise tax, rose 16 percent to 14.48 billion rupees, while other income, mainly returns from investment, fell 25 percent to 882.7 million rupees.

Last week, Hero Honda Motors Ltd. posted a 24.2 percent rise in quarterly profit to 1.94 billion rupees.

Bajaj share has gained over 13.6 percent since the end of June on rising unit sales, while the benchmark index gained 20 percent. Hero Honda shares lost 17 percent over the same period on prospects of slowing demand and stiffer competition.

Bajaj has been boosted by the performance of its entry-level CT-100 model, launched earlier this year, and is now relying on its recently introduced 125cc Discover bike to dent market leader Hero Honda's dominance of the key mid-price segment.

Bajaj's sales of motorised rickshaws grew 7.4 percent in July-September, but scooter sales fell 35.9 percent. Overall vehicle sales rose 17.1 percent to 445,195 units, but cost pressures and lower other income hurt earnings.

Operating margin, a key measure of efficiency, fell to 16.54 percent in the quarter from 18.18 percent in the year-ago period, but it was up from 15.04 percent in the preceding three months.

Indian firms have introduced several new bike models this year that has intensified competition in the market.

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