Auto stocks in top gear; Bajaj Auto surges 9% on strong performance in Q3

Bajaj Auto said the operating performance was driven by favorable mix, lower marketing spends, and operating leverage

Shares of automobile and auto ancillary companies were in top gear on Friday, with Nifty Auto and the S&P BSE Auto indices surging nearly 4 per cent at the bourses, hitting their respective 52-week highs, following a strong performance during the quarter ended December 2020 (Q3FY21).

Bajaj Auto, Motherson Sumi Systems, Ashok Leyland, Tata Motors, Hero MotoCorp, Exide Industries, Bosch and TVS Motor Company from the indices were up between 4 per cent and 8 per cent. JK Tyre & Industries, Apollo Tyres, Ceat, TVS Srichakra, Lumax Auto Technologies and Munjal Showa, the non-index stocks, rallied between 5 per cent and 15 per cent.

At 10:20 am, the Nifty Auto and the S&P BSE Auto index were up 3.6 per cent each as compared to a 0.20-per cent decline in the benchmark indices Nifty50 and the S&P BSE Sensex.

Among individual stocks, Bajaj Auto hit a record high of Rs 4,031, surging 9 per cent on the National Stock Exchange (NSE), after the company reported an expansion in operating Ebitda (earnings before interest, taxes, depreciation, and amortization) margin to 19.8 per cent from 18.4 per cent in the year-ago quarter. The operating performance was driven by favorable mix, lower marketing spends, and operating leverage.

"Domestic two-wheelers (2Ws) sales were back to last year's levels. Base effect will drive growth, but on a like-to-like basis it would be in low single-digits. Domestic three wheelers (3Ws) would see a quarter on quarter (QoQ) recovery, but decline 50 per cent year on year (YoY). The growth momentum in exports would continue, with 12-15 per cent growth in most markets. If ASEAN recovers, it would clock its best ever exports," brokerage Motilal Oswal Financial Services said in results update.

Bajaj Auto would benefit from premiumization trend and good growth opportunity in exports, it further said, adding that domestic 3W recovery might be delayed as it is vulnerable to a possible disruption from electrification.

Meanwhile, shares of JK Tyre & Industries hit a fresh 52-week high of Rs 133, soaring 15 per cent in intra-day trade on Friday, after the company reported highest-ever quarterly sales and net profit for Q3FY21. The stock of tyre & rubber products maker has surged 52 per cent in the past four trading days.

The company's consolidated sales grew 26 per cent YoY to Rs 2,776 crore, a best-ever for any quarter. Ebitda, meanwhile, doubled to Rs 507 crore and profit before tax (PBT) recorded a multifold increase to Rs 343 crore, compared with the corresponding quarter. Ebitda margins came at 18.1 per cent, up 250 basis points on a sequential basis.

The strong performance during the quarter was largely driven by the increased demand for passenger, commercial vehicle as well as farm tyres. The continued focus on improvement in operating efficiencies and reduction in interest costs contributed to improved profitability, the management said.