Bajaj Auto share price decline by 9 percent in early trades as the company reported quarterly results that fell short of market expectations. Bajaj Auto’s stock plunged by 8.9%, trading at Rs 10,575.40 on the Bombay Stock Exchange (BSE). The stock touched intraday low of Rs 10,455 at the time of publication of this report.

Bajaj Auto, one of India's leading two-wheeler manufacturers, reported a significant decline in its Q2FY25 financial results, with consolidated net profit after tax (PAT) dropping by 31.4% to Rs 1,385.44 crore. Despite this, the company achieved a robust revenue increase of 22.2% to Rs 13,247.28 crore. The company's stock took a hit following the weaker-than-expected earnings, falling by 8.39%. Nevertheless, Bajaj Auto has shown strong performance year-to-date, up 60%, and continues to outperform the Nifty Auto index. Challenges in the domestic and export markets, coupled with deferred tax expenses, have impacted profitability, but growth in electric vehicles and exports signal long-term potential.

Financial Performance: Q2FY25 Earnings Decline

Drop in Net Profit: Bajaj Auto reported a 31.4% fall in consolidated PAT, declining to Rs 1,385.44 crore for Q2FY25. The sharp decline was largely driven by a one-time impact of Rs 211 crore related to changes in deferred tax for investment income following the Finance Act, 2024.

Revenue Growth: Despite the decline in net profit, the company’s revenue from operations increased by 22.2% year-on-year, reaching Rs 13,247.28 crore. This growth was fueled by robust vehicle sales, including motorcycles and electric scooters, as well as spares and parts sales, alongside steady recovery in exports.

Sequential Performance: Compared to the previous quarter, Bajaj Auto’s revenue rose 11%, while PAT experienced a 28.65% decline, reflecting ongoing margin pressures.

Stock Market Reaction

Shares Take a Hit: Following the announcement of the Q2 results, Bajaj Auto’s stock plunged by 8.9%, trading at Rs 10,575.40 on the Bombay Stock Exchange (BSE). Despite the market's negative reaction to the quarterly earnings, Bajaj Auto shares have gained 60% year-to-date, showcasing strong overall performance in 2024.

Outperformance Against Nifty Auto: Over the past 12 months, Bajaj Auto has outperformed the Nifty Auto index, largely due to gains in market share within the 125cc+ motorcycle segment, margin improvements, and a unique shareholder reward policy. These factors have helped the company weather current challenges, even as short-term earnings fall short of expectations.

Operational Highlights

Record EBITDA: Bajaj Auto achieved an all-time high EBITDA of Rs 2,653 crore, representing a 24% year-on-year growth. This reflects the company’s strong operational efficiency, driven by its domestic business across motorcycles, commercial vehicles, and electric scooters.

Double-Digit Growth in Domestic Revenue**: The domestic market has remained a strong driver for Bajaj Auto, with double-digit revenue growth for ten consecutive quarters. Key product categories include two-wheelers, three-wheelers, and the green portfolio (electric and CNG vehicles), which account for 44% of domestic revenues.

Triumph Partnership Boosts Sales**: Bajaj Auto’s partnership with Triumph saw Q-o-Q sales grow by 50%, with total sales hitting 16,500 units in Q2FY25. Domestic sales more than doubled from 1,800-1,900 units per month to 3,500 units, signaling the success of this collaboration.

Market and Demand Trends

Weaker-Than-Expected Festival Demand: The Dussehra festival season showed weaker-than-expected motorcycle sales, with a 2% growth, flat compared to the same period last year. Initial expectations were set at 6-8% growth, but factors such as delayed monsoons and election season likely played a role in subdued demand, particularly in southern and eastern regions.

Export Market Resurgence: Export markets have shown promising recovery, with Latin America leading the way with 20% growth, becoming Bajaj Auto’s largest market. Nigeria also displayed strong recovery, with retail sales rising from 5,000 units in April to 25,000 units in September. Asia maintained stable performance compared to the previous year, supporting the company's international growth trajectory.

Electric Vehicle Growth

Electric Two-Wheeler Success: Bajaj Auto’s flagship electric scooter, the Chetak, has seen remarkable growth, with quarterly volumes reaching 70,000 units and achieving a 20% market share. This is a notable improvement from its initial 6% market share in March, which grew to 11% by June.

Expansion Plans for Chetak: According to Rakesh Sharma, Executive Director of Bajaj Auto, the company is working on expanding and upgrading the Chetak range, with new launches expected in November 2024. This expansion is aimed at broadening the company’s electric vehicle portfolio and capitalizing on increasing market demand.

Bloomberg Estimates and Analyst Expectations

Consensus Estimates Missed: Bajaj Auto’s Q2FY25 results fell slightly below consensus estimates. Bloomberg analysts had forecasted revenue of Rs 13,253 crore, which was 0.95% higher than the actual figure of Rs 13,247.28 crore.

Similarly, the market had anticipated PAT of Rs 2,201 crore, which was 9.13% higher than the actual PAT of Rs 1,385.44 crore. Despite the slight miss, analysts continue to view Bajaj Auto’s long-term prospects positively, especially given the company’s strong foothold in the domestic and electric vehicle markets.

Conclusion

Bajaj Auto’s Q2FY25 performance reflects a mixed picture. While the company continues to demonstrate strong revenue growth and operational efficiency, profit margins have been hit by one-time tax impacts and muted festival demand. However, the company's leadership in electric vehicles, significant market share gains, and robust export recovery suggest long-term growth potential. Despite near-term challenges, Bajaj Auto remains a key player in India’s evolving automotive landscape.