Bajaj Auto hits new peak, gains 4% in weak market on healthy Q3 results

The two-wheeler major reported its highest-ever quarter revenue at Rs 12,114 crore and EBITDA at Rs 2,430 crore for the quarter ended December 2023.

Shares of Bajaj Auto hit a new peak of Rs 7,499, up 4 per cent on the BSE in Thursday’s intra-day trade after the two-wheeler major reported its highest-ever quarterly EBITDA (earnings before interest, taxes, depreciation, and amortization) at Rs 2,430 crore, up 37 per cent year-on-year (YoY) in December quarter (Q3FY24).

Margin improved 100 bps to 20.1 per cent, driven by better realisations, dynamic cost management and operating leverage which more than absorbed the drag from competitive investments on growing scale on electric scooters, the company said.

The company's consolidated profit after tax (PAT) jumped 38 per cent YoY at Rs 2,032 crore. Revenue grew 30 per cent YoY at Rs 12,114 crore, also scaled a new peak during the quarter.

The strong revenue growth led by the acceleration on the domestic business, which on the back of sharp execution and impactful activation during the festive season, cushioned the relatively subdued albeit recovering export sales amidst continued challenges in overseas markets.

Bajaj Auto's overall two-wheeler sales in the domestic market grew 44 per cent YoY in Q3FY24, while the commercial vehicle (three-wheeler) sales grew by 38 per cent. In domestic motorcycle sales, Bajaj Auto claimed it is growing at twice the rate of the market buoyed by the over 125 cc segment demand.

Earlier this month, Bajaj Auto announced Rs 4,000 crore buyback at Rs 10,000 per share.

At 11:12 AM; the stock was trading 3 per cent higher at Rs 7,448, as compared to 0.90 per cent decline in the S&P BSE Sensex. The stock has outperformed the market, by surging 55 per cent in the past six months and 100 per cent in the past one year. In comparison, the benchmark index was up 6 per cent and 17 per cent, respectively, during the period.

Domestic 2W demand is being led by the premium segment (125cc+). And, overall the 2W industry is expected to grow by c.8-10 per cent. Recently launched Triumph 400 has been received well and the near-term focus is on expanding capacity and dealer network, according to analysts at JM Financial Institutional Securities.

Outlook for domestic 3W volume remains strong led by higher CNG demand. In the electric vehicle (EV) segment, the company is gradually ramping up the production and distribution network for both E2Ws and E3Ws.

While domestic demand remains healthy, exports sales are expected to witness gradual recovery owing to macro headwinds. Margins in the medium-term are likely to draw support from favorable mix and higher operating leverage. Given the successful track record of product intervention by Bajaj Auto in the last few years, the brokerage firm said in the result update with ‘positive’ rating on the stock.

According to Motilal Oswal Financial Services, both domestic and export volumes are expected to recover in FY25 from the low base, driving a healthy earnings recovery. The brokerage firm expects Bajaj Auto to benefit from market share gains over the long term, driven by the premiumization trend, the opportunity in exports, and the potential sizable position in the Scooter market via EVs. However, a large part of its India profit pool (of premium motorcycles and 3Ws) is vulnerable to possible disruption from electrification, the brokerage firm said with a ‘neutral’ rating on the stock.