Bajaj Auto Q4 preview: Over 10% revenue dip seen on volume de-growth

Two-wheeler major Bajaj Auto is set to announce its fourth-quarter results on Wednesday for the quarter ending March 2020 (Q4FY20). According to analysts, Bajaj Auto's revenues may see a decline of over 10 per cent on a year-on-year (YoY) basis, led by 17 per cent fall in volumes to 9.91 lakh units. However, improvement in realisations and average selling price (ASPs) should provide some relief to the bottom-line.


Bajaj Auto clocked a net profit of Rs 1,067.6 crore and revenue of Rs 7,420.5 crore in Q4FY19. At the bourses, Bajaj Auto tumbled 35.8 per cent in Q4FY20 as compared to Nifty's 29.4 per cent fall in the same period. Meanwhile, Nifty Auto index declined 42.3 per cent.


Commenting on the overall sector, Edelweiss said,"In Q4FY20, we expect margin pressure to persist due to spike in commodity prices, negative operating leverage and inventorisation, offset marginally by pricing discipline. We, however, believe that staff costs could offer some potential margin support."


Here's what some of the top brokerages expect from Bajaj Auto's Q4FY20 numbers




The brokerage expects around 10 per cent YoY decline in Bajaj Auto's revenue to Rs 6,701.9 crore, led by 17 per cent decline in overall volumes. Net profit is seen rising 1 per cent to Rs 1,076.8 crore. Earnings before interest, tax, depreciation, and ammortisation (Ebitda) may dip 9 per cent YoY to Rs 1,116.5 crore while margins is seen declining 120 basis points (bps) QoQ to 16.7 per cent on rising commodity cost, operating leverage impact, partly offset by favorable currency.


"Overall, we remain positive on stocks with higher rural exposure (as the recovery can be faster) and where valuations are cheap. Hence, we maintain our Buy rating for Bajaj Auto," Nomura said in a note.


Axis Capital


Analysts at the brokerage firm underline the 17 per cent volume decline during the quarter, due to similar trend across segments. The only positive was 2W export volumes which grew 15 per cent YoY. As such, they expect Bajaj Auto's revenue to decline 13 per cent to Rs 7,420 crore on a YoY basis, as the volume dip is partially offset by 4 per cent YoY increase in average selling price (ASPs) due to BS6 related price increases (which offsets weaker mix). Sequentially, ASPs is likely to increase by 1.5 per cent, they said..


Overall, the brokerage is building a 2 per cent YoY increase in Bajaj Auto's profit after tax (PAT). In terms of operational performance, Ebitda is seen at around Rs 1,000 crore, down 19 per cent YoY while margin may contract by 90 bps YoY, as negative operating leverage is expected to offset higher gross margin. "On QoQ basis, expect gross margin to decline by 110 bps due to weaker mix and discounts offered in domestic bikes segment ahead of BS6 changeover," Axis Capital said in a note.




The brokerage expects Bajaj Auto's revenue to decline by around 12 per cent YoY to Rs 6,539 crore, as weak volume growth is likely to get cushioned by improvement in realizations (BSVI transition). Net profit is also likely to dip 9.5 per cent YoY to Rs 966.3 crore. It expects the two-wheeler manufacturer's margin at 15.5 per cent, largely due to negative operating leverage which should be offset slightly due to strong cost focus, stable share of 3Ws and well managed BSIV inventory levels. Ebitda is seen at around Rs 1,014.7 crore, down 17.3 per cent YoY.


Motilal Oswal


For the quarter, the brokerage sees an 11.8 per cent YoY dip in Bajaj Auto's revenue to Rs 6,546.8 crore. PAT could grow 0.3 per cent YoY to Rs 1,070.1 crore and Ebitda could come at around Rs 1,120 crore, down 8.7 per cent YoY. "Bajaj Auto's domestic 2W volumes declined, but exports grew around 9 per cent on a YoY basis. The adverse mix would be diluted by a favorable Rupee. Exports could come under threat due to volatile oil prices, and earnings per share (EPS) cut is to be relatively lower due to the benefit of a weak Rupee," Motilal Oswal said in a note.