Bajaj Auto Q3 preview: Adverse product mix may hurt margins, say analysts

Two-wheeler major Bajaj Auto is expected to post over 30 per cent year-on-year rise in both, revenue and net profit, when it reports its December quarter (Q3FY24) earnings on Wednesday, January 24

Bajaj Auto Q3FY24 preview: Two-wheeler major Bajaj Auto is expected to post over 30 per cent year-on-year (Y-o-Y) rise in both, revenue and net profit, when it reports its December quarter (Q3FY24) earnings on Wednesday, January 24. 
 

According to an average of six brokerage estimates, the Bajaj group company's topline may rise to Rs 12,079 crore in the recently concluded quarter, up 29.7 per cent from Rs 9,315.1-crore revenue earned in the corresponding quarter of the previous fiscal (Q3FY23). 
 

This, brokerages note, would be on the back of double-digit growth in volumes, coupled with higher average selling price (ASPs).
 

 

The bottomline, on the other hand, could grow to Rs 1,992 crore, up 33.6 per cent from Rs 1,491.4 crore profit of Q3FY23.

Sequentially, revenue was Rs 10,777.3 crore, while PAT was Rs 1,836.1 crore in Q2FY24.
 

On the bourses, shares of Bajaj Auto were trading 0.4 per cent lower at Rs 7,064 per share at 9:20 AM as against 0.4 per cent dip in the benchmark S&P BSE Sensex.
 

Here's what key brokerages expect:
 

Kotak Institutional Equities

The brokerage pegs volume growth at 22 per cent Y-o-Y in Q3FY24 led by a 38 per cent Y-o-Y increase in domestic two-wheeler (2W) and three-wheeler (3W) segment on account of strong festive demand, partly offset by a 3-12 per cent decline in export 2W segment due to weak demand trends in Africa and South Asia regions. 
 

It, thus, expects revenue to increase by 29 per cent Y-o-Y/11.4 per cent Q-o-Q to Rs 12,006.9 crore, led by volume increase, and 6-7 per cent increase in ASPs due to the higher mix of the 3W and premium 2W segments, lower mix of the export 2W segment, price increases, and favorable forex.
 

Operationally, it expects Ebitda to jump 34 per cent Y-o-Y/11.5 per cent Q-o-Q to Rs 2,377.3 crore, but sees Ebitda margin flat at 19.8 per cent due to operating leverage benefits and lower advertisement spends, partly offset by inferior product mix (higher mix of electric 2W and entry-level motorcycle segments).
 

PAT is seen at Rs 2,021.3 crore. 
 

Axis Securities

Alike KIE, it expects total revenues to increase by around 32 per cent Y-o-Y (Rs 12,258 crore) led by 22 per cent Y-o-Y increase in volumes and 8-9 per cent Y-o-Y increase in ASPs on account of higher mix of the 3W, premium 2W segments expansion, and price increase.

READ: 3-wheeler dominance gives Bajaj confidence to try 2-wheelers running on CNG
 

It, however, anticipates Ebitda margin to improve by ~33 bps on a Y-o-Y basis (decline 38 bps Q-o-Q) to 19.4 per cent.

Ebitda margin was 19.8 per cent in Q2F24, and 19.1 per cent in Q3FY23. 
 

Equirus Research

The brokerage believes overall volumes increased by 2 per cent Q-o-Q/24 per cent Y-o-Y while ASPs changed by +8 per cent Q-o-Q/-1 per cent Y-o-Y due to worse mix. 
 

Total 2W volumes changed by 18 per cent Q-o-Q/22 per cent Y-o-Y mainly due to better domestic sales. 3W volumes were +22 per cent Q-o-Q/-7 per cent Y-o-Y. 
 

It expects Ebitda to change by 11 per cent Q-o-Q/33 per cent Y-o-Y due to better operating leverage.
 

It said margins, outlook on volumes, and outlook on export will be among key monitorables. 
 

Phillip Capital

The brokerage expects revenue to grow 11 per cent Q-o-Q to Rs 12,012.9 crore led by 14 per cent increase in volumes, partially negated by decline in realisations due to adverse product mix.
 

Ebitda margin, it said, could decline 76bps Q-o-Q to19 per cent on adverse product mix due to lower exports and 3W mix.

Source: Brokerage reports