Two-and-three-wheeler maker Bajaj Auto on January 30 is likely to report more than 10 percent year-on-year growth in Q3FY20 profit, driven by operating income, realisation and lower tax cost.
According to brokerages, revenue from operations is expected to see around 5-7 percent growth despite lower sales volumes, led by higher realisation.
"We expect revenue to increase by about 3 percent QoQ (up 7 percent YoY) led by better volume growth and a sequential improvement in average selling price (ASP) due to higher share of 110/125cc motorcycles," said Edelweiss which expects 19 percent YoY growth in profit.
According to Reliance Securities (which sees 7 percent growth in revenue and 19 percent in profit YoY), positive impact of healthy exports coupled with favourable exchange rate would boost profitability, while discounts on domestic 2-wheelers may lower the benefit to some extent.
Bajaj Auto reported a 4.6 percent year-on-year degrowth (up 2.5 percent QoQ) in volumes during the quarter ended December 2019, due to 16 percent YoY decline in domestic bike volumes and 13 percent fall in exports of 3 wheelers, but continued to see market share gains. Volumes were better than its peers Hero MotoCorp (down 14.4 percent YoY) and TVS Motor (down 17 percent YoY).
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Realisations are likely to grow over 9 percent YoY, but there could be a 2 percent decline on sequential basis.
Motilal Oswal feels realisations are expected to rise 9.4 percent YoY to Rs 64,360 per unit (against Rs 58,812 per unit YoY), but may decline 2 percent QoQ. Prabhudas Lilladher also expects the same.
At operating level, the growth is likely to be driven by lower raw material cost and favourable currency, which may drive margin higher by more than 100bps YoY.
"We expect Bajaj Auto's margin to improve by 132bps YoY (up 34bp QoQ) amid gross margin improvement vis-a-vis last year due to commodity, currency and pricing gains," Antique Stock Broking said.
Motilal Oswal sees 12 percent rise in EBITDA and 100bps margin expansion in Q3 YoY while Prabhudas Lilladher said with favorable currency movement and raw material cost to remain benign, it expects margins to inch-up 120bps YoY/ 20bps QoQ and EBITDA to rise 12.4 percent/1.7 percent YoY/QoQ.
Update on pricing and specs for Chetak (e-scooter), and update on upcoming new product launches & BS6 pricing would be key to watch out for.
The stock gained more than 8 percent during the December quarter against Nifty Auto (up 10 percent) and Nifty50 (up 6 percent).