Bajaj Auto Q4 Results Review - Margins Expansion To Continue: Yes Securities

Yes Securities Report

Bajaj Auto Ltd.’s Q4 FY24 results were operationally better as Ebitda came in better by 5.5- 7% to our/consensus. This was led by better then expected average selling prices at Rs 107,500 (estimate Rs 104,300). Ebitda margins expanded ~80 basis points YoY at 20.1% (flat QoQ) was due to-

1. favorable currency and product mix,

2. benign raw material, and

3. operating leverage.

We believe, margins expansion to be gradual given positive impact of favorable mix (increasing share of premium ICE and three-wheeler), operating leverage to off-set by increasing share of electric vehicles (even though production linked incentive benefits are expected to accrue).

Overall demand outlook is improving as-

1. domestic two-wheeler industry volumes expected to grow 7-8%,

2. domestic three-wheeler volumes to continue current volume momentum led by conversion from diesel to CNG and from e-rick to e-auto,

3. exports – two-wheelers to see gradual recovery while opening up of Egypt market to provide cushion to muted three-wheeler volumes.

Bajaj Auto continue to up the game in domestic EV space as it targets volume rampup for Chetak as well as EV three-wheeler, led by new launches and network expansion.

This will further be supported by captive financing arm (Bajaj Auto Credit Ltd.). The near-term focus is to-

1. increase distribution for Chetak (to ~600 stores in H1 FY25 from 200 in FY24) and

2. New EV two-wheeler launch in Q1 FY25E and

3. network expansion for EV three-wheeler.

We believe, Bajaj Auto to continue outpace domestic two-wheeler volume growth of 7-8% while exports recovery likely to be gradual.

We raise FY25/26 earnings per share by ~3.5-4% each to build in for better ASP and Qute exports.

We build revenue/Ebitda/adjusted profit after tax compound annual growth rate of 18.1%/21.2%/19.4% over FY24-26E and maintain an Add with target price of Rs 9,966 (earlier Rs 8,715) at 25 times March-26 EPS (versus 23 times earlier), given improved EV narrative and diversified product portfolio to de-risk segmental slowdown, if any.

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