Bajaj Auto reported a bigger-than-expected third-quarter profit on Wednesday, as strong domestic demand and an increase in prices of its motorcycles and scooters made up for weak exports.
The company’s profit increased nearly 23% to 14.91 billion rupees ($182.84 million) for the quarter ended December 31. Analysts, on average, had expected a profit of 13.64 billion rupees, according to Refinitiv IBES data.
The company’s revenue from operations increased 3% to 93.15 billion rupees, helped by demand for sports motorbikes during the festive season, when many Indians make big-ticket purchases.
Demand from high-income consumers for everything, from home care goods to motorcycles, has held up in recent quarters despite price hikes by Corporate India to protect its bottomline from higher costs.
“We expect auto and auto ancillaries to see the benefit of softening input costs from Q3 onwards,” HDFC Securities said in an earnings preview note for the sector.
Bajaj Auto’s total expenses dropped 1% in the third quarter.
The company’s domestic two-wheeler and commercial vehicle sales volumes, which account for more than half of the overall sales, climbed 4% from a year earlier.
“Robust double-digit revenue growth in the domestic business offset the drop in exports arising from the challenging market context,” Bajaj Auto said in an exchange filing, adding “judicious pricing” also helped boost earnings.
Exports, which made up over 40% of total volumes, dropped 33% as macroeconomic and regulatory pressures in Africa weighed.
The company’s two-wheeler exports to Africa, which includes Nigeria, Uganda and Democratic Republic of Congo, contributed to more than half of its motorcycle exports in the last fiscal year, according to its annual report.
Bajaj Auto’s stock climbed 11% in 2022, compared with the Nifty auto index’s 15% gain.
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The Production Linked Incentive (PLI) schemes were announced in March 2020 to encourage domestic manufacturing and increase the competitiveness of Indian companies in the global market.
Rural markets currently contribute a third of sales at the local two-wheeler unit of Japan’s Honda Motor. Sales of two-wheelers in the Indian market have fallen by nearly a third in fiscal 2022 from the peak of 21 million units in FY19, amid higher cost of ownership.