Q2 Results: Bajaj Auto’s Profit Beats Estimates On Higher Other Income, Lower Tax

At a time India’s automobiles sector battles a slowdown, Bajaj Auto Ltd.’s second-quarter profit beat estimates on higher other income, lower tax expense and better-than expected operational performance.

Net profit rose 21.7 percent year-on-year to Rs 1,402 crore in quarter ended September, according to the two-wheeler maker’s exchange filing. That’s higher than the Rs 1,153-crore average estimate of analyst forecasts tracked by Bloomberg.

The bottom line was aided by a 27 percent jump in other income at Rs 393 crore. Tax expense nearly halved year-on-year to Rs 206.5 crore from Rs 500 crore, and realisation per unit rose 9.4 percent to Rs 65,670, aiding its profit.

The lower tax is likely due to the corporate tax rate cuts announced by the finance minister in September, said Mayur Milak, senior research analyst at IndiaNivesh Securities. “But my sense is this is a one-off benefit.”

Earnings before interest, tax, depreciation and amortisation fell 7.3 percent to Rs 1,277 crore. Ebitda margin contracted to 16.6 percent from 17.1 percent a year ago, but it stayed higher than the estimate of 15.7 percent.

Milak said both realisation and Ebitda margin suggested a “good performance” “As far as operating performance goes, they have surprised positively.”

Revenue declined 4.1 percent to Rs 7,707 crore—analysts had estimated Rs 7,408-crore estimate. The company’s sales volumes across all its segments fell 12 percent year-on-year.

The automobile sector is currently is facing its worst slowdown in at least a decade as Indians cut consumption in a slowing economy. That has triggered job losses at both automakers and showrooms to cut costs while passenger vehicle sales dropped for the 11th straight month in September.

In an interview with CNBC-TV18 in August, Managing Director Rajiv Bajaj has said that most of this slowdown was of India’s own making as it did not invest enough to be globally competitive to help exports offset lower domestic demand.

Bajaj Auto is the only stock on the Nifty Auto Index that has gained among peers so far this year on the back of higher share of exports to its overall sales and market share gains in the commuter segment, among others. The stock of the maker of Pulsar motorcycles turned positive on Aug. 14 and has since then rallied nearly 15 percent, according to Bloomberg data.

Shares of Bajaj Auto gained as much as 3 percent after the company announced its earnings. That compared with a 0.3 percent rise in the NSE Nifty 50 and 1.3 percent advance in the NSE Nifty Auto Index.