The turnaround in the auto sector after the 2008 slowdown is no doubt a reason for the strong show put up by the Bajaj Auto stock. But the massive three-year return is also a fruit of the company's new brand strategy put in place during that time, which has paid-off.

Accordingly, it focused on the differentiation and positioning of the ‘Discover' and ‘Pulsar' brands to cater to the aspirational ‘middle of the market' segment between executive and premium bikes as also the entry and executive bikes.

This shift in strategy also coincided with the consumer preferences slowly moving to higher segment bikes, as evidenced by the trend in motorcycle sales in the April 2007-March 2008 period. Priced at attractive points, bikes such as the Discover 100, 125 and 150 cc and the new Pulsar 135,150, 180 and 220 cc have done the trick.

A second reason for the thumbs-up given to the stock is that , at a time when spiralling input costs were eating into the margins of its competitors in the last few quarters, the company had maintained its operating margins close to 20 per cent throughout.

This has been possible due to its superior product mix tilted towards executive and premium bikes, three-wheelers (where margins are close to 30 per cent) and exports (over 20 per cent margins).

Related Topics
comment COMMENT NOW