Shares of Bajaj Auto surged as much as 6.44% in Thursday's trading session as company's margins exceeded market expectations despite the coronavirus-led slump in the sector.
After touching an intraday high of ₹2722.80, at 01:15 pm, the scrip was trading at ₹2656.70 up 3.86% while the benchmark index, Sensex rose 301.42 points, or 0.98% to 31,120.03.
At operating level, company's earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 2.1% to ₹1,252.8 crore and margin expanded 190 basis points year-on-year to 18.4% due to healthy exports in quarter ended 31 March 2020.
Income from other sources in March quarter surged 44.8% to ₹533 crore year-on-year, while tax cost declined 27.9% to ₹411 crore in the period under review.
Bajaj Auto's standalone revenue from operations during the quarter declined 8.50% year-on-year to ₹6,610.90 crore against ₹7225.20 for the same quarter last year. A Bloomberg poll of 18 analysts had estimated revenue of ₹6463.10 crore.
Analysts at Kotak Institutional Equities believe that the company's 2-Wheeler segment is well-positioned given lower ticket size to gain from consumer preference for personal mobility given fear of contracting covid-19 while using public transport and ride-sharing services. As a result, we expect Bajaj Auto to benefit in both domestic as well as export geographies.
"The company has improved its EBITDA per vehicle to ₹11,042 in FY2020 from ₹10,345 in FY2019, despite sharp fall in volumes, which is quite commendable. Also, the company has improved its EBITDA margin trajectory in March FY2020 despite only 1 million units of sales. They maintain 'buy' rating on the stock," Kotak said in a note.
The complete nationwide lockdown on account of covid-19 has effectively wiped out 40 days, of which 32 days have been in FY2021. "Now, with the partial ease on lockdown, our manufacturing facilities at Chakan, Waluj and Pantnagar have opened, but are not working at full pace," company said.
"Bajaj Auto’s strong operating performance was driven by mix and Forex, which supports our view that the company has several levers to protect margins. Volume recovery for both India and exports is expected in second half of FY2021, with risk of financing for India and oil prices forex devaluation for exports," wrote analysts at Motilal Oswal Financial Services in their post-result report. The brokerage has a neutral rating on the stock.