Earnings Outlook
Bajaj Auto to ride on higher exports, price hikes Oct-Dec
This story was originally published at 13:11 IST on 24 January 2025
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By Narayana Krishna
HYDERABAD – Improved volumes, growth in exports and price hikes are likely to help Bajaj Auto Ltd. report an year-on-year growth in December quarter earnings, though the uptick in key numbers might be limited to single digit, according to analysts. The two- and three-wheeler manufacturer's net profit is expected to grow 5.3% from a year ago to INR 21.5 billion, according to an average of estimates of 15 brokerages. The company's top line is projected to grow 7% on year to INR 129.5 billion, according to the average of estimates.
In the December quarter a year ago, Bajaj Auto reported a net profit of INR 20.4 billion on a revenue of INR 121.1 billion. Bajaj Auto reported 2% year-on-year and 0.2% sequential growth in its Oct-Dec total sales volumes, while exports went up by 22.4%, according to analysts.
Sequentially, the net profit is seen growing 7% while net sales are seen declining 1%, the estimates show. Sequential fall in sales numbers is mainly due to a higher base in the September quarter, analysts said. For Jul-Sept, the company reported a net profit of INR 20.1 billion on a revenue of INR 131.3 billion.
The estimates for net profit during the quarter range from INR 19.9 billion by JM Financial Institutional Securities Pvt Ltd. to INR 23.7 billion by KRChoksey Research, while estimates on net sales range from INR 125.0 billion by Anand Rathi Share and Stock Brokers Ltd. to INR 133.5 billion by KRChoksey Research. The Pune-based automaker is scheduled to announce its December quarter results on Jan 28.
KEY FACTORS
According to Kotak Institutional Equities, the key factors that would influence the auto major's December quarter performance are 2% year-on-year growth in overall sales volume, which was led by a 21% on-year rise in exports. Exports were mainly driven by the two-wheeler segment due to recovery in African market and sustained demand momentum in Latin America, Kotak Institutional said.
The other factors like 33% on-year growth in three-wheelers segment are expected to aid the company's earnings. The 10% on-year decline in the two-wheeler segment in the domestic market is due to continued weakness in entry-level segment. Factors like inventory correction and decline in three-wheeler sales in the domestic market are also likely to offset the impact of exports growth, Kotak Institutional said.
Similar to the views of Kotak Institutional, brokerages including KRChoksey, Axis Securities Ltd, Prabhudas Lilladher Pvt Ltd. and Nuvama Wealth Management Ltd. have said that the volume growth and price realisation may aid the year-on-year revenue growth for the quarter for Bajaj Auto.
Motilal Oswal Financial Services Ltd. said the failure to revive the overall automobile demand during the festival season remains a drag on domestic sales, while growth in exports is an indicator of sustained recovery in global markets.
ELECTRIC PUSH
Analysts are keenly observing Bajaj Auto's electric vehicle segment's performance. Bajaj Auto sells electric scooter under the iconic Chetak brand. Nirmal Bang Equities Pvt. Ltd. said Bajaj Auto has dethroned Ola Electric in electric two-wheeler business. Analysts expect higher share of electric vehicles to likely impact the company's overall costs and margins. Analysts are keenly watching the progress of Chetak EV and its volumes going forward as the competition in this segment is high. Pricing trends of the two-wheelers segment also key factor to watch out for, analysts feel.
MARGINS
In the December quarter, the company's earnings before interest, taxes, depreciation, and amortisation, or EBITDA, is estimated at INR 26 billion, representing a growth of 7% from a year ago, but a decline of 2% from a quarter ago, according to the average of 13 estimates. The highest and lowest estimates for Bajaj Auto Oct-Dec EBITDA are INR 28.2 billion and INR 24.8 billion, respectively.
Analysts' estimates for Bajaj Auto December quarter EBITDA margin were in the range of 19.4-21.1%. Most analysts expect the two-wheeler company's margins to shrink slightly due to weak domestic sales, and higher share of electric and entry-level two-wheelers. However, Prabhudas Lilladher and KRChoksey are expecting margin expansion on account of operating leverage benefits and commodity tailwinds, besides higher exports.
Following are the Oct-Dec earnings estimates for Bajaj Auto Ltd. based on reports from 15 brokerage firms in the descending order by the estimate of net profit:
Brokerage name | Net Sales | Net Profit | EBITDA |
-------(In INR million)------- | |||
KR Choksey Research | 1,33,499.00 | 23,682.00 | 28,175.00 |
Incred Research Services Pvt Ltd | 1,32,148.00 | 22,749.00 | 27,108.00 |
Emkay Global Financial Services Ltd | 1,31,933.00 | 21,761.00 | 26,255.00 |
Sharekhan Ltd | 1,26,590.00 | 21,750.00 | -- |
Motilal Oswal Financial Services Ltd | 1,30,278.00 | 21,660.00 | 25,839.00 |
Prabhudas Lilladher Pvt Ltd | 1,30,844.00 | 21,587.00 | 26,726.00 |
HSBC Global Research | 1,28,281.00 | 21,398.00 | 25,400.00 |
Kotak Institutional Equities | 1,29,674.00 | 21,385.00 | 25,713.00 |
Nirmal Bang Equities Pvt Ltd | 1,29,571.00 | 21,308.00 | 25,914.00 |
Nuvama Wealth Management Ltd | 1,26,312.00 | 21,231.00 | 25,205.00 |
Nomura Equity Research | 1,26,188.00 | 21,115.00 | 24,840.00 |
Axis Securities Ltd | 1,29,810.00 | 21,090.00 | 25,820.00 |
Elara Securities (India) Pvt Ltd | 1,29,549.00 | 20,983.00 | 25,068.00 |
Anand Rathi Share and Stock Brokers Ltd | 1,25,028.00 | 20,904.00 | -- |
JM Financial Institutional Securities Pvt Ltd | 1,32,252.00 | 19,854.00 | 25,889.00 |
Average | 1,29,463.80 | 21,497.13 | 25,996.31 |
At 1145 IST, shares of Bajaj Auto were trading 1% higher at INR 8,483.10 on the National Stock Exchange. End
US$1 = INR 86.23
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Deepshikha Bhardwaj
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