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Jan 16, 2013, 12.37 PM IST | Source: Moneycontrol.com

Here's what to expect from Bajaj Auto Q3 earnings

Bajaj Auto will kickstart automobile companies' earnings for the Oct-Dec quarter on Wednesday.

Moneycontrol Bureau

Bajaj Auto will kickstart automobile companies' earnings for the Oct-Dec quarter on Wednesday.

Analysts on average expect the company to report a net profit of Rs 842.7 crore, up 6 percent year-on-year, while revenue is seen up 8 percent at Rs 5,449.1 crore, according to a CNBC-Awaaz poll. It must be noted that Bajaj Auto had an exceptional loss of Rs 59 crore due to valuation losses on derivative hedging instruments in the year ago quarter.

Two-wheeler companies have seen slow growth for last several months in the domestic market, while exports were also hampered in markets like Sri Lanka and Egypt. Competition has also increased, especially in the 100-125 cc segments, where the likes of Bajaj Auto and Honda Motorcycle and Scooter India are trying to win share from market leader Hero MotoCorp.

October, November saw some festive season off-take. However, sales volume growth is still expected to be in single digits.

Motilal Oswal, for instance, expects Bajaj Auto's third quarter volumes to grow 3 percent YoY (6 percent sequentially), helped by the delayed festive season and recent launches.

The brokerage expects its margins will decline 150 bps year-on-year in the three-month period, "with the reduction in export incentives more than offsetting the benefit of mix improvement."

A few other brokerages like Elara Capital expect the company to report better gross margins sequentially due to better export realisations and higher contribution of three-wheelers.

Prabhudas Lilladher sees Bajaj Auto's EBITDA (earnings before interest, taxes, depreciation and amortization) margins at 20.1 percent, up from 19.7 percent in the year ago quarter.

Key things to Watch

- Volume growth during the third quarter
- Sales of recent launches like Discover 125ST and Discover 100T motorcycle
- EBITDA margins for the quarter and the road ahead
- Overall growth outlook for the rest of the fiscal and calendar 2013
- Planned new launches, including those from Bajaj stable and from KTM
- Update on the RE60 four-wheeler

Stock Watch

Bajaj Auto shares on Tuesday closed up a little over 1 percent at Rs 2,115 on NSE. The stock has gained around 16 percent since September-end, outperforming the wider Nifty, which has gained a little over 6 percent in the same period.

While Motilal Oswal has a "buy" rating on the stock, Prabhudas Lilladher advises investors "reduce" Bajaj Auto. Elara Capital has a "sell" on the stock.

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