Bajaj Auto’s overall market share rose by 2 to 3 percent but the stocks dipped southward after the Q2 results
Only recently Bajaj Auto reported a growth of 5.27% rise in consolidated net profit to Rs.1, 257 crores for the second quarter which ended on 30th September. Although Bajaj showcased a strong 25 per cent growth year on year in its sales volume the analyst is saying otherwise.
During the second quarter, Bajaj Auto sold a total of 8,04,645 units in the domestic market which is up by almost 20 per cent in the corresponding period during the last fiscal year. Overall share in the domestic market has increased to 18.6 per cent compared to 16.9% in the second quarter of 2017-18.
The company also recorded exports of 5,34,799 units during the quarter, resulting in a growth of 33 per cent over the same period of previous fiscal. There is no doubt in the fact that Bajaj’s strategy is paying off, the sales channel to looks quite charged up while Bajaj’s motorcycle market share also rose by about 200 to 300 basis points.
However, all this data still does not excite the investors and the reason being Bajaj’s Auto stock. Bajaj’s Auto’s stock tumbled by almost 4.3 percent after the Q2 results, reacting not in a positive way because of its weak operating performance. Bajaj Auto suffered because of a heavy price discount on sales and also the steep rise in commodity costs which are responsible factors of this problem.
However, the rise in prices in commodity costs has worsened the problem. According to an analyst at Sharekhan, the pricing pressure to regain the market share and higher raw material costs has taken a toll on the overall profit margin of the two-wheeler manufacturer.
Out of the top three two-wheeler manufacturer of India including Hero Motocorp, TVS, and Bajaj, it was TVS who posted a marginal drop while Hero Motocorp showcased drop of 220 bps but the main sufferer was definitely Bajaj who showed a drop of 290 bps.
The unimpressive growth in realization and pressure on profitability leaves a negative impact on investors. Furthermore, the festive season also brings higher interest, fuel and insurance costs which results in negative sentiments on stocks. Thus the stock analysts have already trimmed earnings due to all this pressure for some more quarters.