Bajaj Auto rallies 5% after strong Q2 results
What's the story
Automobile major Bajaj Auto saw its stock jump nearly 5% on October 19 after announcing a 20% increase in net profit for the September quarter, beating analyst estimates. However, brokerage firms remain cautious due to concerns like stagnant exports and competition in the electric vehicle (EV) market. Bajaj Auto's revenue from operations rose by 5.6% to Rs. 10,777.27 crore, mainly driven by lower commodity costs and implemented price hikes.
Details
Exports decline amid currency-led inflation
In the second quarter, Bajaj Auto's exports took a 9% hit as currency-led inflation affected overall affordability. Nuvama Institutional Equities maintains a 'hold' rating on the stock, Moneycontrol reported, stating that the company may underperform compared to peers like TVS Motors due to its weak presence in scooters and significant exposure to overseas markets. At the time of writing, Bajaj Auto's stock was trading at Rs. 5,364, up 4.42% from the previous close on the NSE.
Insights
Surplus and margin expansion
In a press release, the company stated that it has surplus funds of Rs. 17,326 crore as of September 30, 2023. Its EBITDA margin expanded by 260 basis points to 19.8% as of September 30. Automobile retail sales in India as a whole increased by 9% in the April-September period of this fiscal year. The Federation of Automobile Dealers Associations (FADA) expects demand to further increase during the festive season.