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Informist, Tuesday, Oct. 15, 2024 

 

By Darshan Nakhwa 

 

MUMBAI – Bajaj Auto Ltd. is expected to report strong growth in key earnings parameters in Jul-Sept, driven by healthy growth in volumes, price hikes, better realisation and operating leverage, according to analysts. The two- and three-wheeler manufacturer's net profit is expected to grow 23% from a year ago to INR 22.62 billion, according to an average of estimates of 10 brokerages. The company's top line is projected to grow 24% on year to INR 133.17 billion, according to the average of estimates. Sequentially, the net profit and net sales are seen growing 14% and 12%, respectively.

 

The estimates for net profit during the quarter range from INR 21.57 billion by Motilal Oswal Financial Services to INR 24.29 billion by KR Choksey Research, while estimates on net sales range from INR 129.90 billion to INR 135.70 billion. 

 

According to Kotak Institutional Equities, the company's net profit in Jul-Sept will be impacted by a provision of INR 2.1 billion for deferred tax due to the withdrawal of indexation benefit and change in long-term capital gains tax. 

 

The Pune-based company's revenue growth is expected to be led by a 16% on-year increase in volumes and higher average selling price on account of a richer product mix and price increases, according to analysts. The company is expected to report a year-on-year increase of between 5% to 12% in average selling price per unit, according to analysts. While Motilal Oswal Financial Services has pegged the company's realisation per unit at INR 107,152, YES Securities has estimated it at INR 109,900 per unit. 

 

"We expect the company's revenue to increase by 29% on year led by 16% on year increase in volumes and a 12% increase in ASP (average selling price) driven by a higher mix of premium motorcycles, and electric two and three-wheeler segments as well as accruals of production linked incentive benefits," Kotak Institutional Equities said in a report. 
 

In the September quarter, the company's earnings before interest, taxes, depreciation, and amortisation is estimated at INR 27.35 billion, representing a growth of 28% from a year ago and 13% from a quarter ago, according to the average of nine estimates. The highest and lowest estimates for EBITDA are INR 28.50 billion and INR 25.97 billion, respectively.

 

The company is expected to report an expansion in EBITDA margin led by a richer product mix, higher average selling price and operating leverage benefits. Its margin is seen expanding to 20.6% from 19.8% a year ago, according to the average of estimates of nine brokerages. On a sequential basis, the metric is seen expanding marginally from 20.2% in Apr-Jun.

 

"Sales mix improvement in the two-wheeler business and stable growth in the three-wheeler business is likely to be offset by healthy growth in the electric vehicle business," Prabhudas Lilladher said in a report. The margins on electric vehicles are much lower than the conventional two-wheelers.

 

WHOLESALE VOLUME 

Bajaj Auto reported 16% on-year growth in total wholesale volume in Jul-Sept, primarily driven by higher domestic dispatches. The wholesale volumes rose on the back of an improvement in rural demand due to the above-normal monsoon, and the expectation of strong demand during the Ganesh Chaturthi and Onam festivals. Also, electric two-wheeler volumes got a boost in July ahead of the expiry of the Electric Mobility Promotion Scheme on Jul. 31, and the introduction of affordable variants. However, the government later expanded the scheme by two more months.

 

Bajaj Auto sold 1.22 million units in the September quarter, compared with 1.05 million units a year ago and 1.10 million units in Apr-Jun. The company sold 776,711 units in India in Jul-Sept, up 22% on year and 13% sequentially and exported 444,793 units, up 7% from a year ago and 8% from a quarter ago. 

 

Two-wheelers comprised 84% of Bajaj Auto's total dispatches in Jul-Sept. The company sold 636,801 units in India, representing a growth of 26% on year and 9% on quarter and exported 396,407 units, up 5% on year and 8% on quarter.

 

In the two-wheeler segment, Bajaj Auto currently offers Pulsar, Freedom, Avenger, Platina, CT, and Dominar-branded motorcycles. It also manufactures and sells KTM, Husqvarna, and Triumph products. In the electric scooter space, it offers four variants of Chetak.  

 

On the commercial vehicle front, the company sold 188,296 units in Jul-Sept, up 9% from a year ago and 25% from last quarter. Its domestic volume rose nearly 6% on year and by 29% on quarter to 139,910 units and exports rose by 21% on year and 13% sequentially to 48,386 units. 

 

Bajaj Auto is scheduled to announce its Jul-Sept earnings on Wednesday. According to brokerages, the company's outlook on demand in India and overseas markets, and comments on electric and compressed natural gas-powered two-wheelers will be some of the key things to focus on.

 

On Tuesday, shares of Bajaj Auto ended at INR 11,521.50 on the National Stock Exchange, down 3.2% from the previous close. The company's stock has gained by 31.5% since its Apr-Jun earnings announcement on Jul 16. 

 

Following are the Jul-Sep earnings estimates for Bajaj Auto based on reports compiled by Informist from 10 brokerage houses:

 

Brokerage firm	Net sales (in mln INR)	Net profit (in mln INR)	EBITDA (in mln INR)
Axis Securities Ltd.	133,360	22,460	27,090
Elara Securities (India) Pvt Ltd.	129,902	21,589	26,306
Kotak Institutional Equities	135,452	22,463	28,339
KR Choksey Research	131,446	24,288	27,744
Motilal Oswal Financial Services Ltd.	130,886	21,568	25,971
Nirmal Bang Equities Pvt Ltd.	135,695	23,213	28,496
Nuvama Wealth Management Ltd.	134,878	22,680	27,269
Prabhudas Lilladher Pvt Ltd.	132,400	22,927	27,251
Sharekhan Ltd.	133,530	22,280	----
YES Securities (India) Ltd.	134,192	22,746	27,678
Average	133,174	22,621	27,349

 

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Saji George Titus

 

 

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