Bajaj Auto Q1 preview: Price increase, cost reductions may offer some comfort; export demand, inventory in focus

Bajaj Auto releases its June quarter scorecard on July 22 where along with numbers, investors will focus on export demand, inventory, updates on new launches and signs of recovery in the three-wheeler segment.

Due to the low base—the June quarter of the previous year was severely hit by COVID-19—the numbers may show a steep rise in percentage terms.

"Year-on-year (YoY) and quarter-on-quarter (QoQ) numbers are not comparable due to COVID disruptions," said Kotak Institutional Equities.

Kotak expects the auto maker’s volumes to have increased 127 percent YoY in Q1FY22 led by the low-base effect.

Net sales may come at Rs 7,468.1 crore, while adjusted PAT may be around Rs 1,077.4 crore for Q1FY22, Kotak said.

It expects EBITDA margin to decline by 115 bps QoQ due to a hike in raw material prices, which may be partially offset by price increase and cost reductions.

As per brokerage firm Motilal Oswal Financial Services, strong exports partially offset a domestic sales loss of Bajaj Auto.

"Higher export contribution and price hikes taken in Jan-Jun’21 may dilute the impact of cost inflation. The decline in export incentives, higher commodity cost, and operating leverage may impact margin," Motilal Oswal said.

The brokerage expects the company's Q1 net sales at Rs 7,319.5 crore, while adjusted PAT may come at Rs 1,117.4 crore.

Brokerage firm BOBCAPS expects Bajaj Auto's volumes to decline 14 percent QoQ. Operating margin may contract 70 bps QoQ on higher raw material cost.

As per BOBCAPS estimates, Bajaj Auto may post net sales of Rs 7,615.2 crore for the quarter, while adjusted PAT may come at Rs 1,200 crore.

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