Bajaj Auto Q4 Preview: Analysts fear Ebitda margin fall despite price hike

Two-wheeler manufacturer Bajaj Auto is geared up to report its March quarter results for financial year 2020-21 (Q4FY21) on Thursday, April 29, amid expectations of a solid growth in revenue and sales volume. However, the company’s Ebitda margin could come under pressure due to higher commodity prices and lower product mix on a quarterly basis.

The commodity prices, over the past six months, have risen sharply - aluminum (over 26 per cent), copper (32 per cent), crude (55 per cent), and steel (55 per cent). In Q4FY21, global brokerage Nomura’s commodity cost index rose nearly 350bps. 

“The current price hikes of 2-3 per cent by automobile manufacturers will only partly offset this cost increase, and hence margins are likely to drop QoQ,” the brokerage said in a result’s preview report, adding, “More price increases would be required in Q1FY22, which, if not taken, can impact margins further”.

At the bourses, the stock of Bajaj Auto has outperformed both, Nifty50 and Nifty Auto indices, on the National Stock Exchange on a year-to-date (YTD) basis, ACE Equity data show. While the stock of the company rallied 6.6 per cent, the Nifty50 and Auto indices gained 2.5 per cent and 4.3 per cent, respectively. 

Against this backdrop, here’s what leading brokerages expect from BAU’s Q4 numbers:

Nomura

It expects revenue to grow 25 per cent year-on-year (YoY) to Rs 8,528.2 crore led by volume growth of 23 per cent YoY and price hikes of nearly 1.5 per cent QoQ. Thos compares with revenue of Rs 6,815.9 crore in Q4FY20 and Rs 8,909.9 crore in Q3FY21.

Operationally, Ebitda (earnings before interest, tax, depreciation, and amortization) is pegged at Rs 1,532.6 crore, up 22 per cent YoY but down 11 per cent sequentially from Rs 1,252.8 crore in Q4FY20 and Rs 1,729.6 crore in Q3FY21, respectively. 

Consequently, Ebitda margins may decline by 144 bps QoQ to 18 per cent from 19.4 per cent. At the bottom-line level, net profit is seen largely flat at Rs 1,337.6 crore, up 2 per cent YoY from Rs 1,310.3 crore. Sequentially, it would be a 14 per cent contraction from Rs 1,556.3 crore.

IIFL Securities

The brokerage expects sales volumes to grow 18 per cent YoY to 1.16 million in Q4FY21 but tumble 10.5 per cent QoQ due to leaner exports and fresh Covid-19-induced restrictions.

Given this, the sequential revenue may slip over 7 per cent to Rs 8,257.4 crore and PAT may fall 18 per cent to Rs 1,280.3 crore.

The brokerage too expects margin to contract QoQ due to higher input costs, negative operating leverage, partly offset by better revenue mix. While Ebitda growth is seen 19 per cent YoY to Rs 1,489.6 crore, margins may decline 34 bps YoY and 144 bps QoQ to 18 per cent.

Emkay Global

Revenues, the brokerage says, are likely to decline 7 per cent QoQ (to Rs 8,280 crore) due to a 10 per cent drop in volumes. 

“Realization should improve due to price increases and higher share of 3Ws/premium motorcycles. Despite better mix, Ebitda margin is likely to contract to 17.2 per cent on higher input costs, adverse currency movement (USD depreciation) and lower scale,” it said. The brokerage expects PAT to grow 0.2 per cent YoY to Rs 1,313.2 crore. 

Kotak Institutional Equities

Volumes during the quarter under study increased by 18 per cent YoY led by 24 per cent YoY increase in export motorcycle volumes, 21 per cent yearly increase in domestic motorcycle volumes offset by 12 per cent YoY decline in three-wheeler segment volumes in 4QFY21. Therefore, it expects revenues to increase by 19 per cent YoY and Ebitda by 15 per cent YoY. 

HDFC Securities 

Analysts at the brokerage would eye outlook on exports, particularly to the African continent, three-wheeler outlook in the Indian market, and updates on PLI scheme and its benefits for Bajaj Auto.