HomeBUSINESSShould you invest in Bajaj Auto shares after Q1 earnings?

Should you invest in Bajaj Auto shares after Q1 earnings?

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Bajaj Auto shares will be in focus on Wednesday after the quarterly earnings for the period of June 30, 2022 (Q1FY22). Sequentially, Bajaj Auto’s net profit declined while revenue was marginally up. In the quarter, sales were constrained due to semiconductors shortage, however, the situation improved as new supply sources were developed. The company’s export contribution surged to 62.2% of the mix versus 60.2% of the preceding quarter, which supported realization growth. Overall, the earnings were above analysts’ estimates.

In Q1FY23, Bajaj Auto posted a net profit of 1,173 crore up by 11% yoy but down by 20% qoq. Standalone revenue stood at 8,005 crore up by 8% yoy and marginally higher from 7,975 crore in Q4FY22. Standalone EBITDA stood at 8,324 crore in Q1 of FY23 up by 8% yoy and 1% qoq.

EBITDA margin rose 100 basis points to 16.6% in Q1FY23 versus 15.6% in Q1FY22, however, dipped by 90 basis points from 17.5% in Q4FY22.

Mitul Shah- Head of Research at Reliance Securities said, “Bajaj Auto delivered a strong operational performance in 1QFY23 with EBITDA margin coming in at 16.2%, 101bps above our estimate of 15.2%. Its revenue and PAT exceeded our estimates by 5.3% and 9.3% respectively. Revenue increased by 8% YoY (flat QoQ) to Rs80.1 billion, above our estimate of 76 billion on the back of price hike, higher export contribution, and favourable exchange rate. Revenue growth was led by ASP growth of 17% YoY (up 5% QoQ) to Rs85,740 though volume declined by 7% YoY (down 4% QoQ) to 9,33,646 units.”

Shah added, “Its EBITDA increased by 16% YoY (down 5% QoQ) to 12.9 billion, 12.3% above our estimate of 11.6 billion due to higher realisation and tight cost control on other expenses. Its EBITDA margin expanded by 104bps YoY (down 92bps QoQ) to 16.2%, vs our estimate of 15.2%, due to better operating leverage, higher realization, and better mix. “

On BSE, Bajaj Auto shares closed at 3925.20 apiece down by 92.30 or 2.30%. Its market cap is around 1,13,582.34 crore.

Should you invest in Bajaj Auto shares post Q1?

Mansi Lall- Research Associate at Prabhudas Lilladher said, “Domestic 2W sales continue to remain impact. High competition in the premium space has led to market share loss for Bajaj over the past couple of years. Domestic 2W market share has witnessed loss of ~380bps in 1QFY23 impacted by chip issue. However, some uptick can be expected led by festive season and opening up of colleges and offices. Exports demand will likely remain steady. Export contribution to the overall mix has increased sharply – currently 62% of the mix vs ~50% earlier). However, global recession fears could impact volumes in the near term.”

Shah said, “BJAUT reported healthy performance in 1QFY23 beating our estimates across all parameters. However, going forward we expect turbulence in its exports business amid slowdown in few geographies. In view of significant cut in high margin exports business, slower recovery in domestic business, market share loss domestically and in overseas coupled with premium valuation post recent run-up making risk-reward adverse, we currently have SELL rating on BJAUT.”

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