Bajaj Auto Q4 preview: Will subdued vols, high input cost dampen results?

Analysts expect revenue to decline by 11-12 per cent year-on-year (YoY) in Q4, marked by decline in volumes and surge in average selling price due to steep price hikes taken over the last few quarters

Bajaj Auto Q4 preview: Bajaj Auto is likely to post a muted performance in the March quarter 2022 (Q4FY22) on Wednesday, April 27. Analysts expect revenue to decline by 11-12 per cent year-on-year (YoY) in Q4FY22, marked by decline in volumes and surge in average selling price due to steep price hikes taken over the last few quarters. The auto maker’s revenue rose 1.25 per cent YoY to Rs 9,022 crore in Q3FY22.  

While Bajaj Auto’s sales volume was the worst hit among the two-wheeler (2W) companies in March (registering a fall of 22 per cent YoY and 8 per cent sequentially), flattish exports had softened the blow. Diluted domestic demand, coupled with semi-conductor shortage, also drove the 41-per cent slump in domestic volumes. However, three-wheeler (3W) business demand remained resilient as domestic volumes climbed to 15 per cent in March.

With aluminum prices soaring over 30 per cent this year, analysts at Axis Securities expect elevated input costs to dampen EBITDA by 27 per cent YoY to Rs 1,107 crore in Q4FY22 from Rs 8,596 crore in Q3FY23. 

At the bourses, Bajaj Auto has zoomed over 16 per cent this year as against 0.74 per cent rise in the S&P BSE Auto index. It has outperformed peers like Maruti Suzuki, TVS Motors, Ashok Leyland that gained over 4 per cent, 7 per cent, and 1 per cent, respectively.

Factors to watch out

Investors will map management’s commentary on profitability trajectory for Q1FY23 due to higher raw material prices and demand dynamics as auto-makers announce price hikes across model ranges.

Here is what top brokerages expect from Bajaj Auto’s Q4FY22 numbers:

Axis Securities: The brokerage firm expects volumes to decline by 17.3 per cent YoY to 9,76,651 units due to supply challenges and muted exports. It also expects a 30 per cent dip in domestic 2W volumes, but anticipates 8 per cent increase in domestic 3W volumes to cushion the blow.

The brokerage also models revenue to decline by 12 per cent YoY to Rs 7,587 crore led by volume decline and steep price hikes. On the other hand, profit-after-tax (PAT) is expected to drop by 23 per cent YoY to Rs 1,030 crore.

ICICI Securities: The brokerage firm, too, expects a muted show amid sequential decline in volumes and rise in input costs, especially aluminum metal. Analysts here expect net sales to drop by 16.7 per cent sequentially to Rs 7,511 crore. They also forecast EBITDA margin to contract by 140 basis points (bps) at 13.8 per cent.

Meanwhile, PAT is pegged at Rs 987 crore, down 18.7 per cent quarter-on-quarter (QoQ) and 25.9 per cent YoY. On the contrary, analysts see improvement in 3W volume share to 12 per cent, up 80 bps QoQ.

IIFL Securities: Analysts expect price hikes taken this year will offset rising input costs. They expect a richer revenue mix, currency benefit on exports to act as margin headwinds. The brokerage firm pencils decline in EBITDA margin by 245 bps YoY to 15.3 per cent – led by increase in input costs and negative operating leverage. Meanwhile, PAT is also expected to tumble by 18.2 per cent YoY at Rs 10,897 crore.