Bajaj Auto Q2: Analysts see 10- 26% YoY dip in PAT; margin expansion likely

According to the company's monthly auto sales data, Bajaj Auto sold 10.53 lakh units during Q2FY21, down 10.2 per cent on YoY basis

Bajaj Auto is scheduled to announce its September quarter earnings on Thursday and analysts expect the automaker to report strong sequential recovery, albeit lower on year-on-year (YoY) basis, on both the revenue and bottom-line front while margins are set to expand.

According to the company's monthly auto sales data, Bajaj Auto sold 10.53 lakh units during Q2FY21, down 10.2 per cent on year-on-year (YoY) basis as compared to 11.73 lakh units sold in Q2FY20. It comprises the sale of 5.73 lakh units and 4.79 lakh units in the domestic market and export, respectively. On a quarter-on-quarter (QoQ) basis, however, Bajaj Auto has reported 137.7 per cent growth in volumes from 4.43 lakh in Q1FY21.

Even for the auto sector as a whole, analysts expect Q2FY21 earnings to witness strong sequential recovery. Pent-up demand, increased preference for personal mobility and strong rural sentiments has helped revive the sector. Ramp-up in production post unlocking has helped fill channel inventory, which is still below the normal level.

At the bourses, shares of Bajaj Auto inched up just 1.3 per cent during the September quarter as compared to 9 per cent gain in the S&P BSE Sensex, ACE Equity data show.

Here's a quick look at what leading brokerages expect from Bajaj Auto's September quarter nos.

Prabhudas Lilladher

The overall volume for Bajaj Auto for the quarter declined around 10 per cent YoY which is likely to drag its revenue lower by 6 per cent YoY to Rs 7,246.7 crore, according to Prabhudas Lilladher. Meanwhile, profit after tax (PAT) is also likely to dip 13.8 per cent YoY to Rs 1,209.5 crore, although, sequentially, it will be an increment of 129 per cent.

"The volume mix has been unfavorable with lower share of premium motorcycles and 3W resulting in decline in realization by 1 per cent QoQ (+5 per cent YoY). We expect margins to improve by around 110bp YoY/ around 440 bps QoQ at 17.7 per cent led by higher gross margins and lower other costs," the brokerage said.

Emkay

According to Emkay, Bajaj Auto's revenue fall on a year-on-year basis is expected to be lower than fall in volumes, owing to increase in realization. As such, it expects Bajaj Auto to report the topline of Rs 7,329 crore, down 5 per cent YoY while profit is expected to come in at Rs 1,234.4 crore, down 12 per cent YoY.

"Realization is expected to rise due to BS-VI launches, price hikes, and currency benefits. Gross margin is expected to increase owing to currency and commodity benefits, despite lower share of 3Ws. The company's 3Ws share stands at 8 per cent against 16 per cent in the year-ago quarter. Also, Ebitda margin is expected to expand to 17.7 per cent from 16.6 per cent in Q2FY20 due to a higher gross margin," Emkay said.

Nirmal Bang

Analysts at Nirmal Bang expect Bajaj Auto's Q2FY21 revenue at Rs 7,177.2 crore, up 130.7 per cent sequentially, but down 10.2 per cent on a year-on-year (YoY) basis. Bottom-line is likely to be affected by lower other income and may come in at Rs 1,188.6 crore.

Besides, the brokerage expects muted average selling price (ASP) growth for Bajaj Auto as BS-VI price increase and better forex realisation will be offset by unfavorable volume mix (decline in share of 3Ws). Gradual pass-through of BS-VI costs and tight cost controls are expected to aid Ebitda margin, which is seen increasing to 18.5 per cent as compared to 16.9 per cent in the year-ago quarter. Earnings before interest tax, depreciation, and ammortisation (Ebitda) is seen at Rs 13,27.8 crore.

BP Wealth

Analysts at BP Wealth are building an 8.8 per cent YoY decline in Bajaj Auto's Q2 revenues to Rs 7,027 crore, driven by disruption in production and supply chain constraints. PAT is seen at Rs 1,157.4 crore, down 17.5 per cent on a YoY basis. Ebitda is expected to be at Rs 1,240 crore although Ebitda margin is likely to increase by 110 bps, led by higher operating leverage and tight cost control measures.

HDFC Securities

HDFC Securities, meanwhile, expects a much bigger, 26 per cent, YoY decline in Bajaj Auto's Q2 PAT at Rs 1,040 crore. It expects the company's net sales at Rs 7,060 crore in Q2FY21, down 8 per cent YoY. However, the brokerage firm said that the sequential growth in the quarter under review should help Bajaj Auto's operating margins expand 190 basis points to 15.2 per cent. Outlook on exports, particularly to the African continent, and recovery trends in the Indian market remain the key monitorables