Bajaj Auto is expected to report an increase in profit in its July-September quarter despite a fall in overall sales volume.
The company is set to announce its results on October 18.
According to the average of 5 brokerages, Bajaj Auto’s standalone net profit is expected at Rs 1,782.14, crore, a 14 percent year-on-year (YoY) increase. The company’s revenue is expected to grow 7.05 percent over the previous year to Rs 10,922.12 crore during the reporting quarter. EBITDA margin is expected to come at 19.5 percent, a 222 basis-point (bps) increase from a year ago.
Price hikes
Brokerages attributed the likely rise in revenue to the company’s price hikes and product mixes. “We expect revenues to increase by 7 percent yoy, led by (1) an 18 percent YoY increase in ASPs (average selling prices) due to the higher mix of the 3W segment, lower mix of the domestic economy motorcycle segment, lower mix of the export 2W segment, price increases and favourable forex and (2) an 8 percent YoY decline in volumes,” Kotak Equities said in a note.
The brokerages added that the price hikes and lower commodity costs would lead to the rise in margins. “EBITDA margins to improve by estimated 90 bps quarter on quarter (QoQ) at 19.9 percent driven by favourable product mix, currency and benign commodity,” Nomura said in a note.
Motilal Oswal said in its note that Bajaj Auto’s margins are set to expand 20 bps QoQ (+200 bps YoY) largely due to savings from declining commodity cost and price hikes”.
Volume decline
Analysts expect the company’s sales volume to decline by 8.4 percent from the year-ago period to 10,53,953. However, this would be a marginal increase of 2.6 percent from the previous quarter. In its September sales data, the company reported its total sales marginally declined to 3,92,558 units from 3,94,747 from the previous year. The domestic 2-wheeler segment saw the biggest decline as it fell by 9 percent to 2,02,510 units. Kotak Equities cited the decline in 2-wheeler sales in the quarter to base effect. Motilal Oswal said the volumes plunged due to “festive season inventory stocking has shifted to 3Q from 2Q last year.”
However, the company posted its highest ever domestic commercial vehicle sales in September, which increased by 60 percent to 50,683.
From June 30, the Bajaj Auto stock has given returns of 8.28 percent, underperforming the Nifty Auto index, which rose by 9.06 percent.
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