Kotak expects EBITDA margin to decline 300 bps YoY (down 50 bps QoQ) largely due to an inferior product mix and increase in discounting in economy motorcycle segment.
Pune-based automobile company Bajaj Auto, scheduled to announce earnings on January 30, is expected to report more than 10 percent growth in profit, driven by revenue growth in the quarter ended December 2018.
According to brokerages, revenue for the quarter may grow in the range of 16-20 percent against a year-ago period, largely led by volume growth.
"Bajaj Auto is expected to report a steady Q3FY19 performance wherein volume growth will outpace the margin pressure," said ICICI Securities which expects revenue to grow 16 percent.
Edelweiss Securities expects revenue growth of 20 percent YoY led by volume growth of around 26 percent YoY.
But the volume mix has not been very favourable with higher share of domestic motorcycles (CT100) and lower 3-wheeler.
Total 2-wheeler sales volume in Q3FY19 stood at 10.8 lakh units, up 32 percent YoY and 3-wheeler sales volume were at 1.8 lakh units, down 1 percent YoY.
Domestic volume growth was at 38 percent in the 2-wheeler segment and negative 17 percent in the 3-wheeler segment.
In Q3FY19, amidst price hike undertaken in October and decline in 3-wheeler's, ICICI Securities expects domestic average selling price (ASPs) to decline to Rs 57,437 per unit.
Edelweiss Securities also expects ASPs to fall about 5 percent YoY, as the company's strategy to focus on market share at the cost of pricing weighs on it.
Overall, brokerage houses expect EBITDA (earnings before interest, tax, depreciation and amortisation) to be flat YoY and there could be a contraction in margin for the quarter.
"Despite favourable currency movement (exports for Q3FY19 were around 42 percent of sales, up 170bps QoQ but down 80bps YoY), we expect margins to decline 270bps YoY / 20bps QoQ," said Prabhudas Lilladher that expects EBITDA to rise 6 percent YoY.
Edelweiss Securities, which expects EBITDA growth at 0.8 percent, said operating margin is expected to dip about 40bps as operating leverage benefits are likely to be offset by higher costs and unfavourable product mix (lower share of 3-wheeler, higher share of the entry-level products in the 2-wheeler segment).
Kotak expects EBITDA margin to decline 300 bps YoY (down 50 bps QoQ) largely due to an inferior product mix and increase in discounting in economy motorcycle segment.
Key issues to watch out for
> Update on 2-wheeler demand outlook from urban and rural areas
> Price increase in domestic markets across segments
> Export demand outlook and pricing in key currency market
> Comments on 3-wheeler demand momentum in the domestic market
> Update on electric vehicle strategy
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