Auto majors lord over small firms

The top auto companies have outperformed their small peers in the first quarter of the current years. Although the sector has reported a 5.5 per cent growth in net profit over a 29 per rise in net sales in the first quarter of the current financial year, the biggies posted a far better show"" over 40 per cent rise in net profit and 32 per cent increase in net sales.

According to results published by 22 auto companies listed on the Bombay Stock Exchange, net profit grew by 5.5 per cent at Rs 1,496 crore for the quarter ended

June 30, 2006, compared to Rs 1,418 crore, reported in the previous corresponding period. The net sales has grown by 28.48 per cent at Rs 19,821 crore (Rs 15,427 crore).

However, the top seven companies of the lot have reported net profit of Rs 1,565.9 crore, a growth of 40.1 per cent.

Their net sales have grown by 31.6 per cent at Rs 18,058 crore. These include Maruti, Tata Motors, Mahindra & Mahindra (M&M), Ashok Leyland, Bajaj Auto, Hero Honda and TVS.

Despite a rise in input costs and general expenditure, a better control on operations has resulted in the operating profits of top seven companies going up by 30.1 per cent to Rs 2,203.4 crore for the first quarter ended June 2006, compared to the operating profit of the previous corresponding period.

According to Mumbai-based equity research outfit SSKI Research, companies like Maruti and M&M had better product mix and a control on cost. Margins of other major players have been impacted due to higher input costs.

Ashok Leyland has reported an expenditure of Rs 1,305.21 crore compared to Rs 974.18 crore in the previous corresponding quarter. Bajaj Auto posted an expenditure of Rs 1,841.9 crore for the quarter compared to just Rs 1,376.6 crore a year ago.

Similarly, Hero Honda incurred an expenditure of Rs 2,045.4 crore as against Rs 1,684.7 crore last year.

Tata Motors' profit growth was impacted by translation losses on outstanding forex liabilities.

The company encountered a forex loss of Rs 78 crore for the quarter ended June 30, 2006 as against a profit of Rs 14.5 crore in the previous corresponding quarter.

To offset margin pressure, the companies hiked the prices of the vehicles by 1-3 per cent, said the report.

According to leading auto analysts in Mumbai, the margins for the rest of the quarters will come under pressure on account of the input prices pointing up.

Besides factors like the monsoons playing a havoc in some parts of the country, the analysts have underplayed the margin expectations for the next quarter.

"We would be able to see more price hikes this year, which the companies will undertake to offset hike in input costs," said an analyst.