Bajaj Auto Q3 Review: Most Analysts Say ‘Buy’, Unfazed By Profit Fall

Bajaj Auto Ltd. saw the benefit of price hikes and a favourable forex on gross margin offset by its inability to pass on raw material cost fully, according to analysts. That, in turn, hurt its operating margin in the third quarter.

The Pune-based two-wheeler maker’s Ebitda margin contracted to 15.1% in the October-December period from 16% in the preceding three months. Its net profit fell, missing estimates, as domestic demand for two-wheelers remained subdued.

The company’s exports, however, picked up, driving up its overall sales during the quarter.

Shares of Bajaj Auto fell as much as 1.74% intraday but pared some of the losses to trade 0.57% down as of 10:10 a.m. on Thursday. Of the 52 analysts tracking the company, 37 recommend a ‘buy’, 10 suggest a hold and five have a ‘sell’ rating, according to the Bloomberg data. The 12-month consensus price target implies an upside of 21.4%.

Here’s what analysts have to say about Bajaj Auto’s Q3 FY22 results.

• Maintains ‘hold’ with a target price of Rs 3,444 apiece.

• Margin in line with consensus estimates at 15.2%, impacted by negative operating leverage and adverse input material costs.

• Exports continue to support overall volume (grew 7% QoQ) against muted demand in domestic two-wheeler segment.

• The company’s inability to pass on raw material cost fully hurt gross margin, impacting Ebitda margin sequentially.

• With 2% QoQ decline, festive season failed to revive domestic demand at 5,23,000 units.

• Maintains ‘buy’ with a target price of Rs 3,800, implying an upside of 10% from Wednesday’s close.

• Ebitda in line, margins improve QoQ.

• Net profit declined 22% YoY and was 5% miss on lower financial income.

• Gross margin improved slightly after five consecutive quarters of fall as price hikes exceeded incremental material cost pressures and forex was favourable.

• Maintains ‘neutral’ with a target price of Rs 3,400, implying a downside of 1.27% from Wednesday’s close.

• Results above estimates led by a better gross margin due to price hikes and favourable forex.

• Better cost management supported Ebitda margin expansion of 60 basis points QoQ.

• Net realisations grew 12% YoY (flat QoQ). Volumes declined by 10% YoY (+3% QoQ).