Bajaj Auto Q4 review: Exports, Demonetisation, BS-III vehicles ban to play its role

Highlights: 

• Bajaj Auto's earnings likely to be impacted by exports, demonetisation, BS-III vehicles ban
• Revenue decline of nearly 10% seen
• EBITDA margins may improve

Analysts believe earnings of Bajaj Auto in the fourth quarter of financial year 2016-17 (FY17) will be impacted due to decline in exports, demonetisation drive and transition to BS-IV from BS-III vehicles. 

Motilal Oswal said, “Total two-wheeler sales declined by 7% in 4QFY17, while 3W volumes fell sharply by 28% YoY led by both domestic and exports falling by 30% & 25% respectively led by demonetization and currency issues in African markets continued.”

While presenting the March month sales number, Bajaj Auto had stated that its volume for April 2016 – March 2017 period decreased by 6% with sales of 3,665,950 vehicles as against 3,893,581 units a year ago same period. 

Chirag Shah and Karthik Subramaniam, analysts at Edelweiss Financial Services said, “We expect revenue decline of 9.6% year-on-year, in line with volume decline." 

"We expect operating margins to decline 70 basis points sequentially to 19.9% due to impact of negative operating leverage and discounts to clear BS-III inventory, offset only partly by a better product mix. We assume a one-time impact of Rs 36 crore to factor in higher discounts to clear the BS-III inventory,” they said. 

Ankit Merchant and Shweta Koltharka, analysts at KRChoksey expect revenue to decline by 11.7% year-on-year. 

The duo at KRChoksey added, “We expect the gross blended realization to improve by 1% y-o-y growth driven by refreshment of Pulsar and launch of Dominor."

"We expect the EBITDA margin to improve by 80 basis points Q-o-Q but remain flat Y-o-Y on back of increasing SG&A spend. We expect PAT margins to decline by 67 basis points Q-o-Q and remain flat Y-o-Y,” Merchant and Koltharka said. 

As per Motilal Oswal, Bajaj Auto is expected to report net profit of Rs 841.9 crore, down by 11.31% yoy and 8.94% qoq and that of revenue to be at Rs 4,910.9 crore, decreasing by 8.42% yoy and 3.07% qoq.