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RPT-India's TELCO, Bajaj Auto Q1 earnings seen higher

By Arif Sharif

NEW DELHI, July 24 (Reuters) - Two of India's biggest vehicle-makers are expected to post healthy first-quarter profits bolstered by cost-cutting moves and a sturdy rural economy, analysts say.

The country's top truckmaker, Tata Engineering and Locomotive Company Ltd (TELCO), is expected to report its second straight quarterly profit for the April-June period after breaking a losing streak that lasted seven quarters.

India's second-largest motorcycle-maker, Bajaj Auto Ltd , is seen posting double-digit profit growth.

TELCO reports first-quarter (April/March fiscal year) results on Thursday, while Bajaj Auto, which is also the country's top scooter producer, follows on Saturday.

Analysts said the results of both TELCO and Bajaj Auto would show improvement from cutting costs and pruning their workforce.

"The momentum in medium and heavy commercial vehicle sales will drive TELCO's first quarter results and of three-wheeler (autorickshaws) and motorcycles at Bajaj," said Pramod Amthe, a Bombay-based analyst at Cholamandalam Securities, in a report.

India is the world's fifth-largest maker of trucks and buses and the second-largest motorcycle market after China.

A Reuters survey of six brokerages showed a median estimate for TELCO's net profit in the first quarter of 193 million rupees ($3.96 million) -- with estimates ranging from 44.7 million to 435 million. It posted a loss of 989 million rupees a year ago.

Net sales in the quarter were estimated to have risen 21 percent from the same period last year to 17.15 billion rupees.

The median estimates for Bajaj Auto, showed an 11 percent rise in first quarter net profit to 1.34 billion rupees, with sales up 29 percent to 10.4 billion rupees.

TELCO'S TRUCKS SALES RISE

India's truck sales have rebounded in the past two quarters, after declining for nearly two years, helped by a rise in farm output in 2001 and the need to replace an ageing transport fleet.

The rebound has helped TELCO the most, as its truck sales vaulted 48.1 percent in volume in the past quarter and buses by 14.8 percent, according to data from an industry body.

TELCO is also India's third-largest maker of cars and utility vehicles. Its car sales fell 3.94 percent in the quarter due to a plant shutdown in April to modify its production line ahead of a new model launch and a crippling power shortage in May.

Amthe said that higher sales of medium and heavy trucks and buses will boost TELCO's operating profit margin to 9.5 percent in the quarter from 8.88 percent a year ago.

Bajaj Auto's net profit will be boosted by a 66 percent jump in motorcycle sales and a 25 percent rise in the high margin three-wheeled autorickshaws and goods carriers.

Lower prices, rising rural incomes, cheaper credit and new model launches have boosted demand for motorcycles in India.

Bajaj, which makes motorycles using technology from Japan's Kawasaki Heavy Industries , has been helped by a string of new models, especially its low-price Boxer motorcycle and the two indigenously developed Pulsar models.

"The Boxer has carved a niche for itself in the entry-level segment," said Avinash Gorakshakar, an analyst at Emkay Shares & Stock Brokers, adding he expected operating profit margin of 18.02 percent in the quarter against 11.6 percent a year ago. (US$1 = 48.7 Indian rupees)