Bajaj Auto Q4 earnings preview: Here's what leading brokerages expect

Bajaj Auto is set to announce its earnings for the quarter ended March 2019 (Q4FY19) on Friday. Analysts expect an impressive 14 per cent increase in volume triggered by the aggressive stance Bajaj Auto has adopted to gain market share in the entry motorcycle segment and new launches. However, the same strategy, coupled with adverse product mix, may hit its topline growth and margin.

According to Sharekhan, Bajaj Auto may see a 5.8 per cent year-on-year (YoY) decline in net profit or profit after tax (PAT) at Rs 1,017.1 crore. The company had reported Rs 1,079.9 crore as PAT in the corresponding year-ago period. HDFC Securities also expects a 3 per cent YoY dip in net profit at Rs 1,100 crore, while Reliance Securities says the slip may be 3.4 per cent YoY at Rs 1,043.5 crore.

In terms of revenue, Sharekhan sees a 5.5 per cent growth to Rs 7,142.6 crore on a YoY basis. The company had posted Rs 6,773.3 crore as revenue in the year-ago period. Reliance Securities also expects a similar 6 per cent YoY increase in revenue to Rs 7,177.3 crore.

Edelweiss and HDFC Securities, see a 3.8 per cent and 4 per cent YoY increase in revenue, respectively, led by volume growth.

Analysts also expect EBITDA (Earnings before interest, tax, depreciation, and ammortisation) to decline, with Reliance Securities expecting it to decline 12.4 per cent on YoY basis to Rs 1,151.8 crore. Edelweiss, on the other hand, pegs this figure at Rs 1,132.8 crore, a 13.9 per cent YoY slip.

As for margins, HDFC Securities pegs the operating margin contraction at 320bps YoY to 16.2 per cent, due to a weaker product mix (higher share ofeconomy segment bikes). Analysts at Sharekhan said the company's EBITDA (Earnings before interest, tax, depreciation, and ammortisation) margin may contract 416 basis points (bps) YoY to 15.3 per cent.

"Aggressive pricing strategy, adverse mix and elevated ad spends to lead to OPM contraction of 410 BPS to 15.3%. EBITDA is expected to drop 17 per cent," analysts at Sharekhan said.

Export demand outlook, domestic market share targets in the two wheeler segment, and new developments/launches in the electronic vehicles (EV) space – particularly for three-wheelers remain key monitorables.

Bajaj Auto Limited