Q2 COMMENT. Bajaj Auto has benefited from better volumes, lower input prices

With subdued growth in both the top-line and adjusted profits, Bajaj Auto’s September 2015 quarter results are not different from Hero MotoCorp’s.

Only that, unlike Hero’s 7 per cent drop in volumes, Bajaj Auto managed to arrest the fall in volumes by riding on customer tendency to down trade to lower-priced bikes during a slowdown.

Bajaj Auto has been pushing its entry segment bikes such as CT 100 and Platina during the ongoing slowdown, to give a leg up to volumes.

This has paid off with its market share in this segment for the first half of 2015-16 improving to 15.3 per cent, from 12.6 per cent a year ago.

While the company’s executive and premium segments have seen a shrinkage in volumes compared with last year, volumes in the entry-segment alone have grown by 13.7 per cent in this period.

New launches in sports segment bikes and exports, which benefited from the rupee’s depreciation vis-à-vis the dollar, has helped push up realisations.

The company has strengthened its leadership position premium bikes category with the recent launches of the Pulsar AS 150, AS 200, RS 200.

Three new variants of the Avenger will also be introduced shortly.

Its market share in the 125-150 cc segment bikes currently stands at over 50 per cent.

Raw material cost as a percentage of sales came down from 70.8 per cent a year ago to 68.1 per cent.

Higher realisations and lower input prices helped operating margins expand to 21.6 per cent now, from 18.9 per cent in the same quarter last year.

But the gains did not carry through much to the bottom-line, with adjusted net profits remaining almost flat at about ₹933 crore.

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