Bajaj Auto Q1 preview: Product mix to drive revenue, net profit may rise 40%

The company's exports are poised to slump by about 35 percent for the quarter

Bajaj Auto Limited is expected to witness a 40 percent increase in its net profit for the first quarter on the back of a good product mix and an increase in the average selling price (ASP). The company reported a net profit of Rs 1,173 crore in the same quarter last year.

The two-wheeler giant will announce its first quarter results on July 25.

The company's revenue from operations is predicted to increase about 30 percent for the quarter benefitting from a favourable product mix and higher ASPs during the quarter and a possible 10 percent increase in overall volumes.

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Its earnings before interest, tax, depreciation and amortization (EBITDA) margins are estimated to increase by 195 basis points, according to the average of the estimates of five brokers. This is due to the reversal of inventorisation benefits (lower production than sales), lower mix

of higher-margin 3-wheelers and exports, partially offset by favourable commodity costs and positive operating leverage.

Bajaj Auto's EBITDA margin had hit a nine-quarter high in the March quarter, at 19.3 percent. This further improvement in margin is likely to be a result of price hikes and lower raw material costs.

Furthermore, analysts at HDFC Securities note that there is a possible increase in the sale of 125cc+ motorcycles, a boost for players focussed on this segment. Hence, operating leverage benefits and an improved mix are likely to drive margin expansion even on quarter-on quarter basis for players like Bajaj Auto.

"Bajaj Auto will significantly outperform the domestic motorcycle industry", the brokerage firm said in its automobile results review.

Bajaj Auto's two-wheeler sales should see a 5 percent increase or about nine lakh units sold in the quarter. There's also an uptick in the domestic 2W sales as analysts predict an average increase of 5 percent from the corresponding quarter last year.  The company's exports, however, are poised to slump by about 35 percent for the quarter due to geopolitical issues.

The company's three-wheeler sales in the country, analysts suggest, should double in the first quarter. Exports are expected to decline by 18 percent, as per average of the estimates of five brokers.

Recently, the company took over the British bike maker Triumph Motorcycles’ India sales and marketing operations. The development is part of the strategic partnership between the two companies announced in 2020 under which they planned to collaborate to create a new range of mid-sized Triumph Motorcycles. This is the third key partnership for Bajaj Auto to manufacture higher CC bikes apart from KTM & Husqvarna.