Uptick in margin is due to higher share in exports & premium products: Bajaj Auto

Bajaj Auto posted its Q3 earnings with a big operational beat. The company reported record-high profits and also gained domestic market share. Margins came in at a multi-quarter high at 19.4 percent.

Rakesh Sharma, ED of Bajaj Auto said, “The uptick in the margins is definitely driven by the two points which is a higher share of exports and a higher share of premium products. Q3 which enjoys the season months both internationally and domestic means it becomes a largest quarter and one gets considerable operating leverage and therefore the fixed cost per unit is lower and that improves the margin. That is also an effect which we enjoyed in Q3.”

Seasonally, Q4 is lower than Q3 and that effect will dilute itself in quarter Sharma said.

“There are headwinds on the cost led by commodities and the precious metals price increases. We are trying to mitigate these but cost increases have come in slugs and because demand recovery is still fragile we will calibrate the recovery of cost increases through price increases over a period of time. So there will be a mismatch and margins will be under slight pressure.”

On a three-wheeler business, Sharma said, “Three-wheeler business which is operating at only 40 percent is showing some signs but it is progressing very slow out of the COVID situation. In Q4 40 percent will go to 50 percent.”