Bajaj Auto Q2 Preview: Revenue Growth Driven by Strong Volumes

Introduction Bajaj Auto Limited, headquartered in Pune, is scheduled to announce its earnings for the second fiscal quarter of FY25 on October 16, 2024. Analysts expect the company to post significant revenue growth, primarily driven by strong sales volumes and a diverse product mix. Over the past six months, Bajaj Auto's stock has surged by more than 30%, reflecting positive market sentiment.

Revenue and Profit Projections Based on a poll of eight brokerage firms conducted by Moneycontrol, Bajaj Auto is projected to report a 23% year-on-year increase in revenue, reaching approximately ₹13,266 crore. Net profit is also expected to see a rise of 21%, growing from ₹1,836 crore to ₹2,227 crore compared to the same period last year. The consistency in earnings estimates suggests that any unexpected variations could lead to significant stock price movements.

Strong Domestic and Export Demand The company's performance has been bolstered by a 16% year-on-year increase in two-wheeler volumes, supported by moderate price increases and an enriched product lineup. Bajaj Auto's strategic focus on expanding its premium two-wheeler segment, coupled with robust export growth and price adjustments, has contributed to its revenue boost.

Rich Product Mix as a Key Growth Driver The company has launched a series of new models over the past year, including the flagship Pulsar variant in May 2024. The expansion into premium segments has played a crucial role in improving the product mix. Additionally, Bajaj Auto's three-wheeler business has shown steady growth, although it is slightly offset by the developing electric vehicle (EV) segment.

Expected Improvement in Margins Analysts predict an improvement in the EBITDA margin by around 52 basis points year-on-year. This anticipated growth is driven by a richer product mix, operational efficiencies, and cost management measures. Better net pricing is also expected to support this expansion.

Factors to Watch in the Quarterly Report Investors will closely monitor several aspects in the upcoming earnings report. These include the demand outlook in both domestic and international markets, developments in CNG and e-mobility, and the company's progress in launching new models. Another key area of interest will be the movement in raw material prices, as it directly impacts profit margins.

Market Performance and Stock Rally Bajaj Auto's stock closed at ₹11,921, marking a 0.2% increase from the previous closing price. The stock has seen an impressive rally of over 30% in the last six months, underscoring strong investor confidence in the company's growth trajectory.

Analyst Insights on Future Outlook Axis Securities highlighted that the anticipated rise in revenue could be attributed to a mild increase in average selling prices (ASPs) due to the enriched product mix. The brokerage notes that the expansion of premium two-wheeler segments and stable export growth will continue to be essential revenue drivers.

Festive Season to Support Further Growth The two-wheeler segment, in particular, is expected to maintain its momentum into the next quarters, especially with the upcoming festive season and a favorable rural demand outlook. According to a report by Prabhudas Lilladher, good monsoon conditions and an increase in rural wedding days are likely to sustain demand in the near future.

Key Risks and Challenges Despite the positive outlook, there are potential risks. Fluctuations in raw material costs, global economic uncertainty, and the competitive landscape in the EV market could impact future performance. Maintaining profitability while expanding the EV segment will be a critical challenge for Bajaj Auto.

Conclusion Bajaj Auto is on track for a strong second quarter in FY25, driven by robust two-wheeler sales, a richer product portfolio, and operational efficiencies. While there are challenges, including raw material prices and competitive pressures in the EV sector, the company's strategic focus on premium segments and cost management suggests a favorable outlook for the coming quarters. Investors will be keenly watching the results on October 16, as any deviation from expectations could lead to significant stock price movements.

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Stock Market Soars: Nifty Crosses 25,900, Sensex Rises by 384 Points to Hit Record Highs

The stock market continued its upward momentum for the third consecutive session on September 23, 2024, reaching fresh all-time highs. The Nifty 50 crossed the 25,900 mark, closing at 25,939.05 with a gain of 148.10 points (+0.57%), while the BSE Sensex surged by 384.30 points (+0.45%) to end the day at a record 84,928.61. This rally was driven by widespread buying across sectors, except for Information Technology, which saw a minor dip.

Market Overview: The day began with a positive opening and traded in a narrow range during the first half, before picking up momentum in the second half, pushing both the Sensex and Nifty to fresh intraday highs of 84,980.53 and 25,956, respectively.

Sector Performance: The market saw broad-based participation, with sectors like PSU banks, real estate, auto, energy, FMCG, metal, and pharma contributing to the rise. The PSU Bank index emerged as the top performer, rallying over 3%, followed by the Realty index, which gained more than 2%. Other sectors like auto, energy, FMCG, metal, pharma, and media posted gains of 0.5%-1%.

However, the Information Technology (IT) sector lagged behind, shedding 0.5%, with Tech Mahindra and other major IT players witnessing some losses.

Top Gainers and Losers: Among the Nifty 50 stocks, Mahindra & Mahindra (M&M) led the gains, rising by 3.35% to close at ₹3,049.80. Other top performers included ONGC, Bajaj Auto, SBI Life Insurance, and Hero MotoCorp. On the flip side, Eicher Motors was the biggest loser, dropping 1.68% to ₹4,879.55, followed by Divis Labs, ICICI Bank, Tech Mahindra, and IndusInd Bank, which also saw marginal declines.

Midcap and Smallcap Performance: The broader markets also witnessed strong interest from investors. The BSE Midcap and Smallcap indices gained 0.7% each, with nearly 350 stocks hitting their 52-week highs. Notable companies included Aditya Birla Fashion, Apollo Hospitals, Bajaj Finserv, Bharti Airtel, Hero MotoCorp, Sun Pharma, and Kotak Mahindra Bank.

Technical Outlook: Market analysts observed that while the Nifty is steadily moving towards the 26,000 mark, a psychological resistance zone, the index may be overbought in the short term. According to technical analysts, a potential correction might occur, with the 25,800-25,850 zone acting as a strong support level. Bank Nifty also showed strength, closing at 54,105.80 and heading towards 55,000, with the support zone now placed between 53,350 and 53,500.

Market Sentiment: Analysts are optimistic about the continuation of the bullish trend but have advised caution due to signs of an overheated market in the short run. Investors are encouraged to adopt a trailing stop-loss strategy to safeguard profits in case of pullbacks. Despite the short-term risk of profit-taking, the broader sentiment remains positive, especially for sectors like banking and realty, which have been top performers.

Conclusion: The record-breaking performance of the markets on September 23 signals strong investor confidence across sectors. However, with key resistance levels approaching, some caution is warranted as analysts predict a potential consolidation or profit-booking phase in the near future. Nonetheless, the market outlook remains positive, with broader market participation and bullish momentum across most sectors.

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FIIs Surge as Net Buyers, DIIs Turn Sellers in Major Market Shift

On September 20, 2024, foreign institutional investors (FIIs) made a notable move by becoming net buyers, purchasing ₹14,064 crore worth of shares. In contrast, domestic institutional investors (DIIs) offloaded ₹4,427.08 crore in equities. This shift occurred after the U.S. Federal Reserve announced a 50 basis point rate cut, boosting global markets, including India.

During the trading session, DIIs bought equities valued at ₹16,987.42 crore but sold ₹21,414.50 crore worth of shares. Meanwhile, FIIs purchased ₹59,452.33 crore in shares while offloading ₹45,388.28 crore in equities, leading to a significant net purchase.

The Indian stock market experienced a sharp rally, with the Sensex closing 1,359.51 points higher, a 1.63% rise to 84,544.31. Similarly, the Nifty index climbed 375.2 points or 1.48%, ending the day at 25,579. All sectoral indices finished in positive territory.

Leading the gains on the Nifty were M&M, ICICI Bank, JSW Steel, Bharti Airtel, and L&T. On the other hand, Grasim Industries, SBI, IndusInd Bank, TCS, and Bajaj Finance were the top losers of the day.

According to Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services, the markets are gradually climbing, and this positive momentum is expected to continue. Strong FII inflows, healthy domestic macroeconomic conditions, and easing concerns about the U.S. economy are likely to sustain the market's rise.

So far in 2024, FIIs have net sold shares worth ₹1.2 lakh crore, while DIIs have been net buyers, accumulating ₹3.28 lakh crore in equities. Despite FIIs being net sellers earlier in the year, their renewed buying in September has contributed to the market's current strength.

 

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Motilal Oswal Foundation Donates ₹130 Crore to IIT-Bombay for Academic Infrastructure

The Motilal Oswal Foundation, the philanthropic arm of Motilal Oswal Financial Services, has announced a ₹130 crore donation to the Indian Institute of Technology, Bombay (IIT-Bombay). This substantial contribution, one of the largest corporate philanthropic efforts in India, was revealed on September 17, 2024.

The donation will be used to establish the Motilal Oswal Knowledge Centre, aimed at enhancing academic infrastructure at IIT-Bombay. Additionally, a Motilal Oswal Centre for Capital Markets will be created, offering graduate and post-graduate courses as well as online diplomas in financial markets.

This donation comes in the wake of a record-setting ₹315 crore gift made by Infosys co-founder Nandan Nilekani in June 2023. Nilekani's contribution was dedicated to developing world-class infrastructure, advancing research in emerging technologies, and fostering a deep tech startup ecosystem at IIT-Bombay. His total commitment to the institute now stands at ₹400 crore.

In recent developments, the 2024 placement season at IIT-Bombay saw average salary packages increase by 7.7% to ₹23.5 lakh per annum. However, the number of students placed declined compared to the previous year, with around 25% of students unable to secure jobs, according to the placement report.

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