Bajaj Auto Q4 profit likely to decline 5% YoY to Rs 1,048cr; EBITDA margin to take a hit

Bajaj Auto is scheduled to announce its fourth quarter earnings on May 17. Research and broking firm Sharekhan expects the auto major to report a net profit of Rs 1,017.1 crore, down 5.8 percent year-on-year and 7.7 percent quarter-on-quarter. Net sales are expected to increase 5.5 percent YoY (down 3.6 percent QoQ) to Rs 7,142.6 crore.

Earnings before interest, tax, depreciation and amortisation (EBITDA) is likely to fall 416.7 percent YoY (down 35.2 percent QoQ) to Rs 15.3 crore.

Prabhudas Lilladher pegs net profit at Rs 1,048.4 crore, down 2.9 percent YoY and 4.9 percent QoQ. It sees net sales rising 10.3 percent YoY and 0.8 percent QoQ to Rs 7,468.8 crore, but EBITDA falling 8.6 percent YoY (up 4 percent QoQ) to Rs 1,201.9 crore.

Narnolia Financial Advisors expects six percent revenue growth, largely driven by 14 percent volume growth in Q4. It sees realisation declining eight percent because of higher sales of entry-level motorcycles in domestic and export markets. Net profit is seen down 13 percent QoQ at Rs 1,024 crore.

Margin is expected to improve 20 bps QoQ to 15.8 percent, led by reduction in commodity prices. Higher sales of Platina will also lead to EBITDA break-even in the entry segment. Two-wheeler inventory across the industry is as high as 80 days, but the same for Bajaj Auto stands at 45 days.

Domestic three-wheeler volumes (contributes 53 percent of 3W volumes) are expected to grow five percent YoY due to higher base and increasing e-rickshaw penetration in FY20. However, volumes may remain close to one lakh units going forward.

The company expects 10-12 percent growth in exports to emerging markets, which will be mainly driven by African market. The same to ASEAN and Middle East will show average growth, while Latin America will continue to stagnate.

Kotak Institutional Equities expects net sales to rise 8.6 percent YoY (but fall marginally by 0.7 percent QoQ) to Rs 73,550 crore. Volumes increased 14 percent, led by 22 percent and nine percent growth in domestic and export bike volumes, respectively.

The research firm expects revenue to rise nine percent YoY as average selling price will decline around five percent due to an inferior product mix.

It sees EBITDA margin declining 350 bps YoY basis (over 30 bps QoQ) largely due to an inferior product mix, higher commodity cost and increase in discounting in the economy motorcycle segment.

Key things to watch out for:

Market share in entry segment (the management targets to achieve 45 percent as against 33 percent at present) and launch status of electric two-wheeler Urbanite.

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