Bajaj Auto Rallies 6% After Q2 Earnings

Bajaj Auto, one of India's leading automobile companies, made headlines as its shares surged over 6% to hit a 52-week high following its Q2 results. The company reported a standalone net profit of ₹1,836.14 crore in the second quarter of FY24, marking a 20% growth from ₹1,530 crore in the same period the previous year. The revenue from operations also showed a healthy increase of 5.6%, reaching ₹10,777.27 crore compared to ₹10,203 crore in the previous year's corresponding quarter.

The company attributed this growth to double-digit volume expansion, particularly in the domestic market, which helped offset the challenges in the export sector. EBITDA during the quarter rose by 21.3% to ₹2,132.8 crore from ₹1,758 crore in the previous year. 

Read Bajaj Auto Q2 Results FY2024

Financial Milestones

Bajaj Auto's Q2 results showcased several financial milestones. Its quarterly EBITDA crossed the ₹2,000 crore mark for the first time, recording a YoY growth of 21%, driven by better realisations and a more favorable product mix. Bajaj Auto's domestic business registered impressive growth, building on six consecutive quarters of double-digit YoY growth. The growth was broad-based, with a strong performance in 125 cc+ motorcycles and record-breaking sales in three-wheelers.

While exports faced challenges due to volatile market conditions, there was still an 8% sequential increase in volumes, signaling a gradual recovery. Bajaj Auto managed to maintain its market share, with volume growth in Africa, LATAM, and SAME regions allowing for a slight rebuilding of inventory in select markets.

With over ₹3,600 crores of free cash flow added in the first half, marking a 1.6-fold increase from H1 FY23.  Bajaj Auto's balance sheet remained robust, with surplus funds of ₹17,326 crore as of September 30, 2023, even after distributing dividends of ₹4,000 crore during the quarter.

Market Reaction and Analyst Views

Following the positive Q2 results, Bajaj Auto's stock price surged by nearly 6%. Its performance in the second quarter surpassed analyst expectations, with a 20% increase in net profit. However, some brokerage firms expressed concerns about muted exports and competition in the electric vehicle market.

Nuvama Institutional Equities gave the stock a 'hold' rating and suggested that Bajaj Auto may underperform peers, primarily due to its limited presence in scooters and its exposure to overseas markets.

Macquarie, on the other hand, maintained a 'neutral' stance on the stock but indicated that exports may have bottomed out, with a gradual recovery expected.

Morgan Stanley remained bullish on the company and assigned an 'overweight' rating. They highlighted the promising outlook for Bajaj Auto's three-wheelers and saw it as an opportunity. 

Key Risks

Despite the positive outlook, Bajaj Auto faces several key risks, including potential lower-than-expected growth in India due to economic slowdown, delayed recovery in demand in regions like Africa, Asia, and Latin America, challenges related to new products in the electric vehicle, scooter, and premium motorcycle segments, fluctuations in commodity prices, and adverse currency movements.

Stock Performance

Bajaj Auto's stock had a fantastic day, surging over 6%. It's been performing well recently, with a 6% gain in the past month and a substantial 27% increase over the last six months. Over a year, the stock has risen by 48%. But the real standout is its five-year performance, doubling investors' wealth with an impressive 117% return. 

Final Words

Bajaj Auto's Q2 results have impressed the market, reflecting strong financial performance and a resilient business strategy. While challenges remain, the company's focus on innovation and market expansion positions it for continued success in the competitive automotive industry.