Bajaj Auto Q3 Preview: Tepid domestic volumes may hurt revenue, EBITDA margin could fall

The Bajaj Auto stock has tanked over 18 percent in the past three months.

Pune-headquartered Bajaj Auto Limited is set to release its earnings report for the third fiscal quarter of FY25 on January 28. Analysts expect modest growth in revenues, driven by robust export volumes, even as domestic sales remain subdued. However, margins could face pressure due to a weak product mix and rising electric vehicle (EV) contribution.

According to a Moneycontrol poll of eight brokerage firms, the Triumph maker is anticipated to record a 7.4 percent year-on-year increase in revenue, reaching Rs 13,016 crore. Net profit is projected to surge 5.5 percent to Rs 2,155 crore from Rs 2,042 crore in the same quarter of the previous fiscal year.

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Earnings estimates from analysts polled by Moneycontrol are in a narrow range, indicating that any positive or negative surprises could trigger a sharp reaction in the stock price.

What factors are driving Bajaj Auto's earnings?

Export volumes: Strong export growth, with volumes up 22 percent YoY, has been a key positive. This rebound, especially in two-wheelers (2W) and three-wheelers (3W), has helped offset declining domestic volumes, which are down 9 percent YoY.

EBITDA Contraction: EBITDA margins are expected to decline by 17-30 basis points year-on-year, primarily due to an inferior product mix driven by a higher contribution from entry-level two-wheelers and electric vehicles. However, profit after tax (PAT) could see variations depending on the accrual of benefits under the Production-Linked Incentive (PLI) scheme.

As Nuvama highlights, "Volume growth and better realisation shall support revenue growth YoY, but EBITDA margins may contract marginally due to higher discounts and marketing spends."

Domestic sales hurt: The company's sales have dragged overall performance, with sequential declines in both 2W and 3W segments, as noted by brokerage firm SMIFS. Furthermore, a weaker product mix, marked by a higher contribution from EVs and lower 3W volumes

What to look out for in the quarterly show?

Key aspects to monitor in the earnings report include the outlook for domestic demand and the trajectory of export growth, particularly in markets like Africa. Analysts will also focus on the impact of rising EV contributions and price adjustments on profitability. Investors will also keenly track the launch pipeline of the company.

Bajaj Auto shares closed at Rs 8,409, higher by 0.1 percent from the last close. The Bajaj Auto stock has tanked over 18 percent in the past three months.

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