Preview Bajaj Auto Q3: Anticipated decrease in domestic sales may impact revenue, leading to a potential decline in EBITDA margin
Preview Bajaj Auto Q3: Bajaj Auto Limited, headquartered in Pune, is gearing up to unveil its earnings report for the third fiscal quarter of FY25 on January 28th. Analysts are predicting a modest increase in revenues, primarily fueled by strong export volumes, while domestic sales are expected to remain lackluster. However, there may be pressure on margins due to a less favorable product mix and the growing contribution of electric vehicles (EVs).
A survey conducted by Moneycontrol among eight brokerage firms suggests that the renowned motorcycle manufacturer is likely to see a 7.4 percent year-on-year revenue growth, reaching Rs 13,016 crore. Net profit is also expected to rise by 5.5 percent to Rs 2,155 crore from Rs 2,042 crore in the same quarter of the previous fiscal year.
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The earnings projections provided by analysts polled by Moneycontrol fall within a narrow range, indicating that any unexpected positive or negative results could lead to a significant impact on the company’s stock price.
What are the driving factors behind Bajaj Auto’s earnings?
One of the key drivers of Bajaj Auto’s earnings has been the strong growth in export volumes, which have increased by 22 percent year-on-year. This growth, particularly in two-wheelers (2W) and three-wheelers (3W), has helped to offset the decline in domestic volumes, which are down by 9 percent year-on-year.
However, there has been a contraction in EBITDA margins, expected to decline by 17-30 basis points year-on-year. This is primarily due to an inferior product mix, driven by a higher contribution from entry-level two-wheelers and electric vehicles. The profit after tax (PAT) could see variations depending on the accrual of benefits under the Production-Linked Incentive (PLI) scheme.
Nuvama highlights that volume growth and better realization will support revenue growth year-on-year, but EBITDA margins may contract marginally due to higher discounts and marketing spends.
The decline in domestic sales has negatively impacted the company’s overall performance, with sequential declines in both the 2W and 3W segments, as noted by brokerage firm SMIFS. Additionally, a weaker product mix, characterized by a higher contribution from electric vehicles and lower 3W volumes, has also contributed to this decline.
Key aspects to monitor in the earnings report include the outlook for domestic demand and the trajectory of export growth, particularly in markets like Africa. Analysts will also focus on the impact of rising electric vehicle contributions and price adjustments on profitability. Investors will also be closely tracking the company’s launch pipeline.
Bajaj Auto shares closed at Rs 8,409, higher by 0.1 percent from the last close. The Bajaj Auto stock has tanked over 18 percent in the past three months.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.