Weak volumes may contract Bajaj Auto's Q3 revenues up to 13% QoQ: Analysts

Bajaj Auto Q3 preview: As per brokerage estimates, the auto major is expected to report marginal improvement in EBITDA margins on a sequential basis to 17.4 per cent in Q3FY23

The two-wheeler major Bajaj Auto is likely to report up to 2 per cent year-on-year (YoY) drop in revenue growth to Rs 8,873 crore in the October-December quarter of this fiscal year (Q3FY23), due to weaker domestic and export volumes, pegged analysts. Meanwhile, they expect revenues to contract up to 13 per cent quarter-on-quarter (QoQ) from Rs 10,203 crore in Q2FY23. The company is scheduled to announce results on Wednesday, January 25.

As per brokerage estimates, the auto major is expected to report marginal improvement in EBITDA margins on a sequential basis to 17.4 per cent in Q3FY23 from 17.2 per cent in Q2FY23, on the back of rich product mix and correction in raw material prices. Profit-after-tax (PAT), however, is likely to decline 11 per cent QoQ to Rs 1,359 crore in Q3FY23.

On the bourses, shares of Bajaj Auto underperformed peers and surged 2.4 per cent in Q3FY23. Peers like Hero MotoCorp and TVS Motor, on the other hand, gained up to 7 per cent, during the same period. In comparison, the S&P BSE Auto index declined 0.8 per cent in Q3FY23.

Here’s a compilation of top brokerage estimates for Bajaj Auto’s Q3 numbers:

Axis Securities

The brokerage firm forecasts revenues to decline 1.5 per cent YoY to Rs 8,888 crore in Q3FY23 from Rs 9,022 crore in Q3FY22, whereas 13 per cent QoQ from Rs 10,203 crore in Q2FY23. The sequential decline in revenues, analysts said, is due to 27 per cent QoQ decline in domestic two-wheeler (2W) volumes, and 1 per cent QoQ export 2W volumes. EBITDA margin, however, is likely to improve 40 basis points (bps) QoQ, on the back of input price correction and richer product mix.

Prabhudas Lilladher

Analysts estimate revenues to drop 12 per cent QoQ to Rs 8,977 crore in Q3FY23, on the back of 15 per cent drop in volumes. EBITDA margin, on the other hand, is expected to expand merely by 30 bps by negative operating leverage to 17.5 per cent in Q3FY23. The auto major is expected to report a drop of 11 per cent QoQ in PAT to Rs 1,359 crore in Q3FY23 from Rs 1,530 crore in Q2FY23.

Motilal Oswal

The brokerage firm estimates 2W domestic volumes to decline 3 per cent YoY, while 2W export volumes declined 31 per cent. Export demand, too, is likely to get impacted by availability and devaluation of forex in end markets. Analysts also said that the slower-than-expected recovery in domestic and exports demand will drive EPS downgrade in FY24. They have shared a ‘neutral’ rating on the stock, with a target price of Rs 4,000 per share.

Phillip Capital

Weaker domestic and export volumes are likely to drop revenue growth 2 per cent YoY and 13 per cent QoQ to Rs 8,873 crore. On the flipside, analysts model EBITDA margin to improve marginally on a sequential basis to 17.4 per cent in Q3FY23, as lower volumes are likely to be offset by improved mix and correction in raw material prices. PAT, however, is likely to improve 12.7 per cent YoY to Rs 1,367 crore in Q3FY23, but contract 10.6 per cent QoQ from Rs 1,530 in Q2FY23.

Nirmal Bang

The company’s volumes are likely to drop 17 per cent YoY, due to lower exports, which would lead to a decline in revenue growth by 1 per cent YoY and 13 per cent QoQ. Average selling price (ASP), however, is likely to improve by 22 per cent YoY and 3 per cent QoQ. The brokerage firm has shared a ‘buy’ stance on the counter, with a target price of Rs 4,102 per share.