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    Q2 preview: Volume decline to weigh on Bajaj Auto’s profits

    Synopsis

    The key moniterables to watch out for are the company’s outlook on exports, particularly to the African continent, and the recovery trends in the Indian market.

    Agencies
    Emkay Global expects Bajaj Auto to report a net profit decline of 12 per cent from a year ago, and sees revenue dropping by 5 per cent.

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    Mumbai: Two-wheeler major Bajaj Auto may report a decline of 12-28 per cent in its September quarter net profit from a year ago, hurt by decline in sales amid the ongoing Covid-19 pandemic. The numbers, however, are likely to display strong sequential growth, on pent up demand as the economic activity started to resume gradually.

    The key moniterables to watch out for are the company’s outlook on exports, particularly to the African continent, and the recovery trends in the Indian market.

    Emkay Global expects Bajaj Auto to report a net profit decline of 12 per cent from a year ago, and sees revenue dropping by 5 per cent. However, on a quarter-on-quarter (QoQ) basis, the company may report a 134 per cent jump in its net profit, while revenues may rise 138 per cent.

    “Revenue fall YoY is expected to be lower than 10 per cent fall in volumes, owing to increase in realization. Realization is expected to rise due to BS6 launches, price hikes and currency benefits,” Emkay analysts said in a note.

    “Gross margin is expected to increase owing to currency and commodity benefits, despite lower share of 3Ws (three wheelers). Also, EBITDA margin is expected to expand due to a higher gross margin,” the brokerage said.

    Kotak Institutional Equities expects Bajaj Auto to report a decline of 12.1 per cent in September quarter net profit, while it believes net sales may drop by 5.3 per cent.

    Kotak expects the company’s volumes to decline by 10 per cent YoY, led by 53 per cent YoY decline in the three-wheeler segment and 11 per cent YoY decline in export 2W volumes offset by 6 per cent YoY growth in the domestic motorcycle segment volumes in 2QFY21.

    It believes the revenues may decline by 5 per cent YoY led by 10 per cent YoY decline in volumes and 6 per cent YoY increase in average selling prices (ASPs) in 2QFY21.

    HDFC Securities expects Bajaj Auto to report a decline of 28 per cent in net profit, while it sees a 8 per cent decline in net sales from a year ago.

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