- Bajaj Auto's Q2 revenue is expected to rise 27% YoY to Rs 18,933 crore supported by vehicle sales
- Net profit projected to grow 27% YoY to Rs 3,156 crore with Ebitda margin improving to 20.7%
- Sales growth driven by two-wheelers and higher export contribution despite sequential export decline
Bajaj Auto Ltd. is expected to report strong year-on-year growth in revenue and profit for the September quarter, supported by higher vehicle sales, an improved export contribution and demand for its two-wheeler portfolio. However, higher raw material costs and changes in the product and export mix will remain key factors to watch.
The automaker's standalone revenue is estimated to rise 27% year on year to Rs 18,933 crore in quarter ended September, compared with Rs 14,922 crore in the corresponding quarter last year. Earnings before interest, tax, depreciation and amortisation (Ebitda) are expected to increase 28% to Rs 3,912 crore from Rs 3,051 crore.
Net profit is projected to grow 27% to Rs 3,156 crore from Rs 2,479 crore a year earlier. The Ebitda margin is expected to improve 30 basis points to 20.7% from 20.4%.
Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better Pay
The estimates come after Bajaj Auto recorded a 20% year-on-year increase in sales to 15.4 lakh units in the quarter, compared with 12.9 lakh units in the year-ago period.
Sales Growth, Export Mix To Support Revenue
Bajaj Auto's quarterly performance is expected to benefit from strong volume growth, with two-wheelers likely to remain the key driver. A higher export contribution is also expected to support revenue growth, although the export share reportedly declined sequentially during the quarter.
The company launched a new 150cc model under its Pulsar brand in second quarter. The refreshed product portfolio could help improve sales momentum and average selling prices (ASPs), particularly as new launches target demand ahead of the festive season.
HSBC noted that overall volumes rose around 20% year on year and 8% quarter on quarter in September quarter. The brokerage also highlighted the potential contribution from multiple refreshed Pulsar launches ahead of the festive period, which could support growth in the December quarter.
READ | Cipla Q2 Preview: Net Profit Seen Falling 29% As US Business Faces Headwinds
Bajaj Auto had implemented a price increase of around 2.25% in Q1, according to HSBC. New Pulsar launches could provide further support to the product mix and average selling prices.
Margin Outlook: Raw Material Costs In Focus
Despite the expected improvement in profitability, higher raw material costs could put pressure on margins. The estimated Ebitda margin of 20.7% represents an expansion of 30 basis points year on year. However, the quarter-on-quarter trend could be weaker as input costs rise.
HSBC expects Bajaj Auto's Ebitda margin to decline 100 basis points sequentially to 19.9%, primarily due to higher raw material costs. The brokerage's forecast highlights the possibility of near-term margin pressure despite strong year-on-year growth.
A positive currency impact is expected to cushion some of the increase in input costs. The company's high export exposure makes currency movements particularly relevant to its profitability.
Investors will also track the margin contribution from internal combustion engine (ICE) vehicles and electric vehicles (EVs), as changes in the product mix could influence overall profitability.
What Brokerages Expect From Bajaj Auto
Jefferies expects Bajaj Auto's net sales to grow 28% year on year, while Ebitda is projected to rise 30% and net profit 26%. The brokerage expects volume growth of around 15%-20%, with two-wheelers continuing to lead the performance. Its estimates point to strong earnings growth, supported by the company's sales momentum and product portfolio.
Macquarie expects revenue to rise 26% year on year, with volumes increasing 20%. However, the brokerage believes domestic ICE two-wheeler market share losses and its assessment that the export recovery is already reflected in estimates could limit further upside to expectations.
The company's ability to defend market share in the domestic market while sustaining export growth will therefore be important for its earnings outlook.
HSBC expects the company's Ebitda margin to decline to 19.9% sequentially, down 100 basis points, as higher raw material costs weigh on profitability. The brokerage also highlighted changes in the sales mix. The export share declined 60 basis points quarter on quarter to 50.3%, while scooters gained 170 basis points to around 10% of the overall mix.
READ | Updated Bajaj Pulsar NS200 Launched At Rs 1.60 Lakh: What's New
Within motorcycles, the share of premium models declined 210 basis points sequentially, while the executive segment's share fell 30 basis points. Overall three-wheeler share increased 210 basis points.
These shifts could influence realisations and profitability, making the composition of sales an important factor alongside headline volume growth.
Bank of America (BofA) has a price objective of Rs 13,700 for Bajaj Auto, based on 25 times its estimated fiscal 2028 earnings, a valuation multiple that it says is in line with one standard deviation above the company's seven-year historical average.
The brokerage factors in growth opportunities from electric vehicles, electric three-wheelers and exports, and values Bajaj Auto's stake in KTM at its current market capitalisation.
BofA identified stronger-than-expected domestic demand, market share gains from new launches and a turnaround at KTM as potential upside risks. Sustained market share losses, currency volatility and a slowdown in export prospects were listed as downside risks.
Key Factors To Watch
Investors will focus on management's commentary on quarterly export volume growth, the impact of raw material costs and the outlook for margins across the ICE and EV portfolios. The performance of the refreshed Pulsar range will also be important, particularly as the company looks to capitalise on festive demand. Meanwhile, the trajectory of domestic market share and export recovery will determine whether the expected earnings growth can be sustained.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
