Bajaj Auto: Multiple Gears To Ride Into The Reopening Initiate at Buy

3 March 2022 | 8:24PM IST
Bajaj Auto (BAJA.BO)

Multiple gears to ride into the reopening; initiate at Buy
Buy
BAJA.BO 12m Price Target: Rs4,270.00 Price: Rs3,293.35 Upside: 29.7%

Chandramouli Muthiah
+91(22)6616-9344 | chandramouli.muthiah@gs.com
Goldman Sachs India SPL
We initiate on Bajaj Auto, India’s largest two-wheeler (2W) company Kota Yuzawa
+81(3)6437-9863 | kota.yuzawa@gs.com
by market cap, at Buy with a 12m TP of Rs4,270, implying 27% Goldman Sachs Japan Co., Ltd.
potential upside. Our investment case is based on: 1) their Rupanshi Bajaj
+1(212)934-7036 | rupanshi.bajaj@gs.com
meaningful export market exposure in 2Ws, offsetting ongoing Goldman Sachs India SPL
domestic demand weakness; 2) upcoming cyclical recovery in

higher margin 3W demand – something the market is yet to
recognize; and 3) their industry leading dividend yield of 5.4%. Key Data __________________________________
These factors underline our FY22E-FY25E EPS CAGR of 21%, with Market cap: Rs953.0bn / $12.6bn
Enterprise value: Rs868.5bn / $11.5bn
our FY24E EPS 6% above consensus on our more bullish view of 3m ADTV: NA
India
earnings recovery in the 3W segment. India Automobiles
M&A Rank: 3
Leases incl. in net debt & EV?: No
Our proprietary work has shown petrol and CNG powered 3Ws are
GS Forecast ________________________________
poised for a volume rebound as India reopens post its third Covid 3/21 3/22E 3/23E 3/24E
Revenue (Rs mn) 277,410.8 333,817.8 390,339.4 438,948.3
wave. 3Ws being CNG friendly vehicles, should also find tailwinds EBITDA (Rs mn) 49,284.8 51,823.1 67,363.0 79,166.3
from the Indian government’s planned 5x expansion of the CNG EPS (Rs) 157.40 162.38 203.71 242.20
P/E (X) 19.9 20.3 16.2 13.6
fuel station network over FY21-FY26. Additionally, we believe P/B (X) 3.6 3.7 3.6 3.4
Dividend yield (%) 4.5 4.4 5.6 5.1
electric scooter readiness and potential returns from the proposed N debt/EBITDA (ex lease,X) (1.7) (1.6) (1.4) (1.6)
captive financing entity will be of focus. We explore upside CROCI (%) 15.8 19.0 27.4 41.0
FCF yield (%) 3.2 4.3 6.5 9.0
scenarios from Bajaj’s proposed captive financing entity, and our
12/21 3/22E 6/22E 9/22E
analysis suggests potential for up to 5% incremental EPS in FY25E.
EPS (Rs) 41.96 39.70 44.46 49.93
Bajaj’s 50%+ volume contribution from exports (peers at sub 30%)
GS Factor Profile ____________________________
acts as a cushion in the current weak domestic demand Growth
environment and should help drive relative earnings outperformance Financial Returns
vs. the peer group, in our view.

Multiple
Valuation: Our 12m TP of Rs4,270 is based on the SOTP Integrated
methodology. Bajaj Auto trades at ~16.6x 1-yr fwd P/E vs. the Indian
Percentile 20th 40th 60th 80th 100th
2W peer group at 18.5x and the NIFTY 50 at ~23x. Key risks:
Electric scooter competition; Dependence on Pulsar and Boxer BAJA.BO relative to Asia ex. Japan Coverage
BAJA.BO relative to India Automobiles
ranges; Loan losses in proposed NBFC; Slow recovery in domestic
Source: Company data, Goldman Sachs Research estimates.
rural/3W market; Fast followers in 2W exports; Delay in domestic See disclosures for details.
recovery.
Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result,
investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this
report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC
certification and other important disclosures, see the Disclosure Appendix, or go to
www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research
analysts with FINRA in the U.S.
Goldman Sachs Bajaj Auto (BAJA.BO)
Bajaj Auto (BAJA.BO) Income Statement (Rs mn) _________________________________

Buy Rating since Mar 3, 2022 Total revenue
3/21
277,410.8
3/22E
333,817.8
3/23E
390,339.4
3/24E
438,948.3
Cost of goods sold (196,096.5) (246,544.8) (282,186.0) (314,570.3)
SG&A (19,169.9) (21,635.6) (24,786.6) (27,653.7)
Ratios & Valuation _______________________________________ R&D -- -- -- --
3/21 3/22E 3/23E 3/24E Other operating inc./(exp.) -- -- -- --
P/E (X) 19.9 20.3 16.2 13.6 EBITDA 49,284.8 51,823.1 67,363.0 79,166.3
P/B (X) 3.6 3.7 3.6 3.4 Depreciation & amortization (2,592.8) (2,703.8) (2,943.0) (3,085.1)
FCF yield (%) 3.2 4.3 6.5 9.0 EBIT 46,692.0 49,119.3 64,419.9 76,081.2
EV/EBITDAR (X) 16.6 16.8 12.8 10.4 Net interest inc./(exp.) (66.6) (75.7) (63.1) (51.4)
EV/EBITDA (excl. leases) (X) 16.6 16.8 12.8 10.4 Income/(loss) from associates -- -- -- --
CROCI (%) 15.8 19.0 27.4 41.0 Pre-tax profit 59,390.0 61,002.3 76,824.4 91,938.0
ROE (%) 20.2 18.5 22.7 25.7 Provision for taxes (13,844.1) (14,014.0) (17,876.4) (21,854.0)
Net debt/equity (%) (33.9) (32.9) (35.4) (45.6) Minority interest -- -- -- --
Net debt/equity (excl. leases) (%) (33.9) (32.9) (35.4) (45.6) Preferred dividends -- -- -- --
Interest cover (X) 701.1 648.9 1,021.1 1,480.6 Net inc. (pre-exceptionals) 45,545.9 46,988.3 58,948.0 70,084.0
Days inventory outst, sales 16.8 16.1 13.1 11.1 Post-tax exceptionals -- -- -- --
Receivable days 29.2 31.4 24.9 20.6 Net inc. (post-exceptionals) 45,545.9 46,988.3 58,948.0 70,084.0
Days payable outstanding 71.1 65.5 54.5 53.4 EPS (basic, pre-except) (Rs) 157.40 162.38 203.71 242.20
DuPont ROE (%) 18.1 18.3 22.4 24.7 EPS (diluted, pre-except) (Rs) 157.40 162.38 203.71 242.20
Turnover (X) 0.9 1.0 1.2 1.2 EPS (basic, post-except) (Rs) 157.40 162.38 203.71 242.20
Leverage (X) 1.3 1.2 1.2 1.2 EPS (diluted, post-except) (Rs) 157.40 162.38 203.71 242.20
Gross cash invested (ex cash) (Rs) 296,362.5 307,234.0 207,859.0 195,581.7 DPS (Rs) 140.00 146.14 183.34 169.54
Average capital employed (Rs) 167,421.3 169,364.5 170,980.6 162,019.0 Div. payout ratio (%) 88.9 90.0 90.0 70.0
BVPS (Rs) 870.94 887.18 907.55 980.21
Balance Sheet (Rs mn) ____________________________________
Growth & Margins (%) ____________________________________ 3/21 3/22E 3/23E 3/24E
3/21 3/22E 3/23E 3/24E Cash & cash equivalents 85,554.7 84,460.4 92,916.0 129,303.6
Total revenue growth (4.7) 20.3 16.9 12.5 Accounts receivable 27,168.5 30,180.8 23,130.8 26,512.0
EBITDA growth 14.9 5.2 30.0 17.5 Inventory 14,938.9 14,502.6 13,489.0 13,141.9
EPS growth 6.3 3.2 25.5 18.9 Other current assets 14,089.2 14,089.2 14,089.2 14,089.2
DPS growth 16.7 4.4 25.5 (7.5) Total current assets 141,751.3 143,233.0 143,625.0 183,046.7
EBIT margin 16.8 14.7 16.5 17.3 Net PP&E 38,594.8 41,191.0 43,198.0 36,113.0
EBITDA margin 17.8 15.5 17.3 18.0 Net intangibles 473.0 473.0 473.0 473.0
Net income margin 16.4 14.1 15.1 16.0 Total investments 134,010.1 134,010.1 134,010.1 134,010.1
Other long-term assets -- -- -- --
Price Performance _______________________________________ Total assets 315,302.0 319,380.0 321,778.9 354,115.5
BAJA.BO (Rs) India BSE30 Sensex Accounts payable 44,526.1 43,905.2 40,409.4 51,720.8
Short-term debt -- -- -- --
5,500 70,000
Short-term lease liabilities -- -- -- --
5,000 65,000 Other current liabilities 11,906.0 11,906.0 11,906.0 11,906.0
Total current liabilities 56,432.1 55,811.2 52,315.4 63,626.8
4,500 60,000
Long-term debt -- -- -- --
4,000 55,000 Long-term lease liabilities -- -- -- --
3,500 50,000 Other long-term liabilities 6,847.3 6,847.3 6,847.3 6,847.3
Total long-term liabilities 6,847.3 6,847.3 6,847.3 6,847.3
3,000 45,000 Total liabilities 63,279.4 62,658.5 59,162.7 70,474.1
Preferred shares -- -- -- --
Apr-21 Jul-21 Oct-21 Jan-22
Total common equity 252,022.6 256,721.4 262,616.2 283,641.4
3m 6m 12m Minority interest -- -- -- --
Absolute 0.2% (12.2)% (15.6)% Total liabilities & equity 315,302.0 319,380.0 321,778.9 354,115.5
Rel. to the India BSE30 Sensex 4.9% (7.4)% (21.2)% Net debt, adjusted (85,554.7) (84,460.4) (92,916.0) (129,303.6)
Source: FactSet. Price as of 3 Mar 2022 close.
Cash Flow (Rs mn) _______________________________________
3/21 3/22E 3/23E 3/24E
Net income 45,545.9 46,988.3 58,948.0 70,084.0
D&A add-back 2,592.8 2,703.8 2,943.0 3,085.1
Minority interest add-back -- -- -- --
Net (inc)/dec working capital (7,207.2) (3,196.9) 4,567.8 8,277.3
Other operating cash flow (9,792.9) -- -- --
Cash flow from operations 31,138.6 46,495.2 66,458.8 81,446.3
Capital expenditures (2,508.7) (5,300.0) (4,950.0) 4,000.0

Acquisitions -- -- -- --
Divestitures -- -- -- --
Others (26,144.8) -- -- --
Cash flow from investing (28,653.5) (5,300.0) (4,950.0) 4,000.0
Repayment of lease liabilities -- -- -- --

Dividends paid (common & pref) (87.3) (42,289.5) (53,053.2) (49,058.8)
Inc/(dec) in debt -- -- -- --
Other financing cash flows 52,276.7 0.0 0.0 0.0
Cash flow from financing 52,189.4 (42,289.5) (53,053.2) (49,058.8)
Total cash flow 54,674.5 (1,094.3) 8,455.6 36,387.5
Free cash flow 28,629.9 41,195.2 61,508.8 85,446.3
3 March 2022 2
Table of Contents
PM summary: Export cushion + 3W rebound + Attractive yield 4
Export cushion supportive in weak domestic demand environment 6
Higher margin 3W recovery led by government push in CNG network 8
Re-entry into fast growing scooter segment with Electric Chetak 12
Our analysis indicates up to 5% EPS upside if captive financing unit turns fully functional 14
Strategic partnership with Yulu for micromobility 16
Financial snapshot 17
Valuation 21
Potential catalysts 23
Key downside risks 23
Scenario analysis 24
M&A Framework: Rank of 3 25
Appendix 27
Disclosure Appendix 29
3 March 2022 3
PM summary: Export cushion + 3W rebound + Attractive yield
We initiate Bajaj Auto at Buy with our 12-month TP of Rs4,270 implying 27% upside. Our recommendation
is based on:
1. Benefit of export market exposure where emission-related price hikes have been less of a
challenge: Bajaj Auto’s steady development of export markets (presence in more than 70 markets outside
of India) over the past 15 years has given it a meaningful hedge to the price sensitive Indian domestic
market. Domestic demand in the current inflationary environment led by both emission regulations and
aluminium price increases has been weak, especially in rural areas where income growth has not caught
up with price hikes.
2. Visibility for a cyclical recovery in higher margin 3W demand: 3W demand in the domestic market is
still 60% below normalised levels as of February 2022. 3W exports have recovered (now 80% of pre-Covid
levels). As offices, schools and colleges reopen post Covid wave 3 in India, we believe it is a matter of time
before higher margin 3W demand starts to recover in the domestic market, and Bajaj Auto as the market
leader appears well positioned to benefit from this demand recovery.
3. CNG network expansion by the Indian government to further support Bajaj’s 3W volumes: The
Indian government is in the process of expanding the CNG fuel station network by 5x to ~10,000 pumps
between FY21-FY26. Early signs are already visible of CNG 3W sales ratios picking up (CNG versions are
~30% of the total 3W sales in CY22 to date vs. 0.1% in CY19). Bajaj Auto as the market leader in 3Ws
with nearly 70% market share in the passenger segment, is poised to be the biggest beneficiary in our
view.
4. Upside optionality from plans to set up captive financing arm: In October 2021, Bajaj Auto passed a
resolution to set up a non-banking finance company (NBFC) for captive financing purposes. The company is
in the process of applying to regulators for approval. Our analysis suggests Bajaj’s EPS could benefit by
1%-5% in FY25E (vs. FY22E EPS), if we assume a range of scenarios between 5%-20% of domestic
volumes are financed captively at ROAs between 1%-4%.
5. Attractive dividend yield of 5.4%: Bajaj Auto has run the most cost efficient 2W operation among
peers in the Indian market and has built up the strongest balance sheet in the space. Bajaj’s recently
updated dividend policy implies a medium-term payout ratio of ~90% of PAT, implying ~5%+ dividend
yield at current prices, which we think is attractive in the current hawkish interest rate environment where
low cash flow generating assets are witnessing multiple contraction due to rising interest rates globally.
Valuation: We expect Bajaj Auto to grow sales/EBITDA/EPS by +14%/+21%/+21% annually over FY22E to
FY25E. Bajaj Auto trades at ~16.6x 1-yr fwd P/E vs. the Indian 2W peer group at 18.5x and the NIFTY 50 at
~23x. Our Rs4,270 12-month target price is based on the SOTP methodology to value the core 2W + 3W
manufacturing business and Bajaj Auto’s stake in PTW Holding (which owns listed Austrian manufacturer
of KTM and Husqvarna motorcycles, Pierer AG).
3 March 2022 4
Exhibit 1: We believe Bajaj’s higher margin 3W volume recovery and favorable cushion from export business would support steady volume
and margin growth over FY22E-FY25E
Bajaj Auto Domestic + Export 2W and 3W volume splits (GSe FY22) ~53% of Bajaj's FY22E Revenue from Exports (GSe FY22) Segmental EBITDA contribution (GSe FY19 - pre-covid)
Domestic 3W, Export 3W, 7%

4%
Domestic 2W,
Domestic
Domestic 2W, Exports (2W + 23%
Revenue, 47% Exports
39% Revenue, 53% 3W), 41% Domestic
Export 2W, 3W, 14%
50%
Spares, 21%
Bajaj Auto Segmental EBITDA margin (GSe - FY21) vs Overall Bajaj FY22E to FY25E Revenue Growth Components
Corporate EBITDA margin 20% 18%
40.0% 18%
35.0%
35.0% 16%
14%
30.0% 14%
12%
25.0%
18.9% 19.5% 10% 9%
20.0% 17.8%
8%
15.0% 11.0% 6% 4%
10.0%
4%
5.0% 2%
0.0% 0%
Domestic 2W Domestic 3W Exports (2W Spares Bajaj Auto ASP 2W Volume 3W Volume Bajaj Auto
+ 3W) Revenue
Source: Company data, Goldman Sachs Global Investment Research
Exhibit 2: Export volumes and revenues are likely to hold up better Exhibit 3: We see Bajaj as structurally best exposed to export
than domestic market over the near term market stability
FY19-FY22E FY22E
Export Volumes and revenues are likely to hold up better Bajaj's high Export exposure a good cushion if rural rebound
than domestic market over the near term takes longer post covid (FY22E)
Bajaj Exports Bajaj Domestic Export as % of Total Volumes Export as % of Revenue
15% 60% 57%

11% 53%
10% 7% 6% 50%
5% 38% 36%
40%
0%
30% 25%
-5% 22%
20%
-10%
-15% 10% 6% 6%
-14%
-20% 0%
Bajaj ASP Bajaj Volumes Hero India 2W mkt TVS Bajaj
Source: Company data, Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research, SIAM
3 March 2022 5
Exhibit 4: Bajaj’s 3W business is more profitable than the 2W Exhibit 5: Bajaj’s FY23E-FY25E EPS can benefit by an additional
franchise (GSe) 4%-6% if it executes on 3W CNG penetration increases due to the
FY19 (pre-Covid) ongoing CNG network expansion initiative of the central
government
Bajaj's EPS can benefit by an additional 4% to 6%
if Government's CNG expansion target is well implemented
Bajaj's 3W business is more profitable than 2Ws
(GSe) FY22E FY23E FY24E FY25E
35% 32% Bajaj Domestic 3W Sales forecast (in 000s) 155 283 320 352
30%
Additional 3W sales potential if Govt's CNG
65 83 105
25% expansion plan is implemented
20% 18%
- as % of Annual Domestic 3W sales 23.0% 25.9% 29.9%
15%
15%
11% - as % of Annual company sales 2.8% 3.1% 3.6%
10%
- as % of Annual Company EPS 4.1% 4.7% 5.6%
5%
0%
2W EBITDA margin Bajaj EBITDA margin 3W EBITDA margin Spares EBITDA
margin
Source: Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research
Exhibit 6: CNG 3W registrations as % of total 3W registrations Exhibit 7: Bajaj offers a 5.4% dividend yield (FY23E) - the highest in
picking up rapidly the Indian Auto OEM industry
CNG 3W registration as % of Total 3W Registrations Dividend yield (FY23E)

(India) 6.0%
5.4%
35.0%
30.2% 5.0%
30.0%
4.0% 3.8%
25.0% 23.6%
20.0% 3.0%
15.0% 2.0%
1.2% 1.2%
10.0% 0.9% 1.0%
5.7% 1.0% 0.8%
5.0% 0.0%
0.9% 0.1% 0.1% 0.0%
0.0% Tata TVS Motor Eicher Maruti M&M Ashok Hero Bajaj
CY17 CY18 CY19 CY20 CY21 YTD CY22 Motors Motors Suzuki Leyland
Source: Vahan Source: Goldman Sachs Global Investment Research
Export cushion supportive in weak domestic demand environment
Bajaj’s export market presence nearly 2x of peers: Exports are now the largest
business unit for Bajaj Auto and account for ~53% of FY21 topline. Exports to the
ASEAN region account for the biggest contribution to its revenue (22% in FY20)
followed by South Asia, Middle East, Africa and LatAm geographies. Bajaj has a
presence in nearly 80 export markets (almost 2x of the presence that peers have) and
its leadership position gives it a good cushion amidst domestic rural weakness post
Covid. Annual 2W exports in global markets represented a ~21 mn units opportunity as
of CY19 and Bajaj Auto’s 57% volume exposure to these global markets acts as a good
hedge against any delay in domestic rural rebound after the impact of Covid subsides.
3 March 2022 6
Exhibit 8: Snapshot of export opportunity Exhibit 9: Bajaj has found steady success in penetrating the African
Registered 2W sales in mn, as of CY19 motorcycle market in the recent past
in mn
Bajaj Auto's export performance in major regions as % of
Annual net sales
Country / Region
2W sales 45%
India 20.0 40%

7%
6%
6%
35%
China 16.3 30%
Indonesia 6.5 25% 16% 19% 22%
Vietnam 3.2 20%

15%
Philippines 1.8 10%
4% 4%
5%
Europe 1.9 5% 12% 11% 9%

Brazil 0.9 0%
FY18 FY19 FY20
USA 0.5 South Asia & Middle East ASEAN Africa Latin America
Japan 0.3
Mexico 0.3
RoW 8.7
Annual Global 2W mkt 60.4

Annual export opportunity 21.4
% of Global mkt 35%
% of Domestic market 107%
Source: Company data, Ministry of Road Transport and Highways, Motorcyclesdata.com Source: Company data
In the 60mn units registered 2Ws market globally, the addressable market for exports
(excluding China, and developed markets which have a different approach to
motorcycling - either local lead electric or high power ICE) by Indian 2W manufacturers
is ~21mn in size — almost equal to the domestic market of ~20mn pre-Covid. The
Indian 2W companies (Bajaj, TVS, Hero, Royal Enfield) are presently exporting ~3.5mn
2W units per year, implying ~18% market share. As penetration for 2W increases in
markets across Africa and other emerging economies (threat of electric scooters is
presently low), we expect companies like Bajaj where management has a clear export
strategy to benefit more than peers.
Exhibit 10: 5-year CAGR of motorcycle fleet in key export markets Exhibit 11: 10-year CAGR of motorcycle fleet in key export markets
CY16 to CY21 CY11 to CY21
5 year CAGR of motorcycle fleet in key export markets 10 year CAGR of motorcycle fleet in key export markets
12% 11% 11% 14% 12%
10% 12% 10%
8% 10% 9%
8% 8%
5% 5% 8% 6% 6% 6% 6%
6% 5% 5% 5% 6%
4% 6% 4%
3% 3% 3% 4% 4%
4% 2% 2% 4% 3% 3%
2% 0% 2% 1%
0% 0%
Indonesia
Iraq
Philippines
Nigeria
Brazil
Sri Lanka
Iraq
Mexico
Vietnam
Thailand
Turkey
Argentina
Dominican Republic
Uganda
Uganda
Indonesia
Mexico
Turkey
Cambodia
Vietnam
Cambodia
Thailand
Brazil
Philippines
Bangladesh
Nigeria
Argentina
Sri Lanka
Bangladesh
Dominican Republic
Source: Euromonitor Source: Euromonitor
Export market volumes have had no BS6 impact, and remain more affordable vs.
domestic market: Contrary to the domestic segment which has witnessed ~11% ASP
price increase over the past 3 years (FY19-FY22E), export markets have only seen ~7%
3 March 2022 7
annualized ASP increase, mostly led by mix and commodities rather than BS6 which has
been the cause for price hikes in India. Export market volumes are therefore likely to
remain steady going forward as well, given the relatively higher affordability vs. the
domestic market where an income catch up needs to happen in order for volumes to
start picking up more rapidly.
Exhibit 12: Bajaj accounts for ~50% of India’s 2W export volumes Exhibit 13: Export volumes and revenues are likely to hold up better
than domestic market over the near term
FY19-FY22E
Bajaj does ~50% of India's 2W Export Volumes (YTD FY22) Export Volumes and revenues are likely to hold up better
than domestic market over the near term
Suzuki, 2% Others, 5%
Royal Enfield , 2%
Bajaj Exports Bajaj Domestic
Yamaha, 5%
15% 11%
Honda, 4%
10% 7% 6%
5%
Bajaj Auto, 50% 0%
TVS Motor, 25%
-5%
-10%
-15%
-14%
Hero MotoCorp, -20%
7% Bajaj ASP Bajaj Volumes
Source: SIAM Source: Company data, Goldman Sachs Global Investment Research
Exhibit 14: Exports have continuously grown - now 25% of 2W Exhibit 15: We see Bajaj as structurally best exposed to export
industry sales volumes vs. 13% in FY13 market stability
FY22E
Exports now 25% of India 2W Sales vs 12% in FY13 Bajaj's high Export exposure a good cushion if rural rebound
takes longer post covid (FY22E)
India 2W Export volume share
Export as % of Total Volumes Export as % of Revenue
30%
60% 57%
25% 53%
50%
20%
38% 36%
40%
15%
25% 30% 25%
10% 22%
17% 18%
20%
12% 12% 13% 13% 12% 12% 13%
5%
10% 6% 6%
0%
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22E 0%
Hero India 2W mkt TVS Bajaj
Source: Company data, Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research, SIAM
Higher margin 3W recovery led by government push in CNG network
India’s central government aims to set up 10,000 retail outlets of compressed natural
gas (CNG) over FY21 to FY26, vs. the ~2,000 pumps that exist today. CNG models are
42% cheaper on running cost per km vs. petrol. Bajaj which has the highest market
share in the Indian 3W market appears set to benefit from this CNG network expansion.
Bajaj’s three-wheeler business is ~16% of volumes but ~28% of sales and ~35% of
EBITDA, per our estimates (steady state year of FY19). We estimate that for the
addition of every 100 CNG pumps, a market of 10,000 three wheelers is created in the
industry. This translates to 100 vehicles per CNG pump. Bajaj has ~70% market share in
3 March 2022 8
the domestic 3W market in India. Assuming ~70% of incremental sales from the CNG
network expansion come to Bajaj’s higher margin 3W franchise, we believe this would
lead to an EPS accretion of ~4% to 6% over FY23E to FY25E.
CNG powered 3Ws emit 5%-10% less CO2 than petrol powered 3Ws and show
substantial reduction in NOx and soot emissions. Therefore, they are less polluting than
petrol or diesel powered options. That said, electric vehicles are still more suitable for
lowering carbon emissions.
Passenger 3Ws in India (90% of 3W volumes) run an average distance of 110 km per
day. Electric 3Ws at present offer only 80km range per charge, at a median speed of
less than 25 kmph, both of which could impact earnings potential of passenger 3W
drivers. Electric 3Ws take more than 3-4 hours to recharge. CNG 3W models have more
favorable emissions and economics vs. petrol and have more favorable running distance
per refueling cycle vs. electric 3Ws. These factors combined with the ongoing CNG fuel
pump network expansion which lowers waiting times for refueling by drivers,
collectively support faster adoption of CNG 3Ws over the next couple of years in our
view, where Bajaj Auto could benefit disproportionally as the 3W market leader.
Exhibit 16: CNG 3W registrations mix picking up rapidly in India Exhibit 17: We estimate that ~35% of Bajaj’s steady state EBITDA
comes from the 3W business (GSe)
FY19 (pre-Covid)
CNG 3W registration as % of Total 3W Registrations ~35% of Bajaj's steady-state EBITDA comes from 3Ws
(India) (GSe)
35.0%
30.2%
30.0%
Spares
25.0% 23.6% EBITDA
contribution
20.0% , 21% 2W EBITDA
contribution, 43%
15.0% 3W EBITDA
contribution, 35%
10.0%
5.7%
5.0%
0.9% 0.1% 0.1%
0.0%
CY17 CY18 CY19 CY20 CY21 YTD CY22
Source: Vahan Source: Goldman Sachs Global Investment Research
3 March 2022 9
Exhibit 18: Bajaj’s 3W business is more profitable than the 2W Exhibit 19: Bajaj’s FY23E-FY25E EPS can benefit by an additional
franchise, per our estimate 4%-6% if it executes on 3W CNG penetration increases due to the
FY19 (pre-Covid) ongoing CNG network expansion initiative of the central
government
Bajaj's EPS can benefit by an additional 4% to 6%
if Government's CNG expansion target is well implemented
Bajaj's 3W business is more profitable than 2Ws
(GSe) FY22E FY23E FY24E FY25E
35% 32% Bajaj Domestic 3W Sales forecast (in 000s) 155 283 320 352
30%
Additional 3W sales potential if Govt's CNG
65 83 105
25% expansion plan is implemented
20% 18%
- as % of Annual Domestic 3W sales 23.0% 25.9% 29.9%
15%
15%
11% - as % of Annual company sales 2.8% 3.1% 3.6%
10%
- as % of Annual Company EPS 4.1% 4.7% 5.6%
5%
0%
2W EBITDA margin Bajaj EBITDA margin 3W EBITDA margin Spares EBITDA
margin
Source: Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research
Exhibit 20: Electric 3Ws, though affordable, still do not offer comfort from a range and speed perspective
Electric
Ideal Real Claimed
km km kmph
Range Range Max speed
Mahindra Treo (Passenger) 141 110 55
Mahindra Treo Yaari (Goods) 85 60 25
Piaggio E-Ape (Goods) 110 80 45
Euler (Goods) 151 110 42
Atul Auto 80 60 25
Lohia Auto 110 80 25
Kinetic Green Safar (Passenger) 130 100 25
India E-3W median 80 25
India E-3W Requirement 110
Source: Company data
3 March 2022 10
Exhibit 21: CNG 3Ws take much less refueling time than electric 3Ws
take to recharge (mostly due to long queues at CNG pumps); refueling
times likely to fall further when network expands
Refuelling / Charging time in mins

300
250 240
200
150
100
45
50
0
CNG 3W refuelling time Electric 3W charging time
Source: Media reports (TheAsianAge, EVreporter), Goldman Sachs Global Investment Research
Exhibit 22: CNG variant offers better range + higher speed than electric 3Ws and lower cost per km than petol/diesel variants
Ex-showroom Cost per Tank Range Cost per Cost per
3Ws by powertrain Brand unit
price* unit capacity (km) fill km
CNG Bajaj Compact RE CNG 227,000 61 1 kg 4.0 100 244 2.4
Electric Mahindra Treo 280,000 6.6 kWh 5.5 80 36 0.5
Petrol Bajaj Compact RE Petrol 227,000 105 1 liter 8.0 240 840 3.5
*pre registration, road tax, insurance
Expected recovery in domestic 3W market to benefit Bajaj more than peers: 3W

volumes (domestic + export) are presently ~40% lower than the pre-Covid level of
FY19. As the economy reopens after the Omicron wave, we expect Bajaj to benefit from
the 3W demand that ensues especially in the domestic market, which presently lags
exports in the reopening from a 3W volume perspective.
3 March 2022 11
Exhibit 23: Signs of 3W recovery visible, more way to go - Bajaj the Exhibit 24: 3W market volumes presently 40% lower than FY19 level
main beneficiary given ~70% market share in 3Ws representing cyclical recovery potential in reopening phase post
Omicron wave
In million units (domestic + exports)
Export 3W volumes Domestic 3W volumes Growth (% yoy) 3W volumes presently 40% lower than FY19 level
1.40 30% 40% representing cyclical recovery potential in re-opening
25%
18% 30% 1.40
1.20 1.27
10% 13% 20%
1.20
1.00 0.57 10%
-4% -1%
0.50 0% 1.00
0.80 0.38 -11%
0.41 0.40
1% -18% -10%
0.27 0.36 0.30 0.35 0.27 0.80 0.72
0.60 -20%
0.49 0.60
0.40 0.39 -30%
0.64 0.70 0.64 -46% -40%
0.53 0.51 0.54 0.48 0.53 0.55 0.51 0.40
0.20
0.22 0.23 -50%
0.00 -60% 0.20
0.00
FY22E FY19
Source: SIAM, Goldman Sachs Global Investment Research Source: SIAM, Goldman Sachs Global Investment Research
Re-entry into fast growing scooter segment with Electric Chetak
Scooters contributed 0% of Bajaj’s sales volumes in FY21. Bajaj historically stayed away
from the scooter market since 2006 in order to prioritize its push towards more
economical motorcycles in the exports markets as well as premiumization in the
domestic market where power biking and upgrade buying lent the company an
opportunity to improve its sales mix. That said, scooters grew from 18% of the Indian
2W market in FY11 to 32% in FY20. Bajaj’s re-entry into the scooter market with Electric
Chetak now gives the company an opportunity to participate in what is likely to be a fast
growing segment going forward (electric scooters) given favorable economics (we
expect scooters to be ~44% of industry volumes by FY30E).
Bajaj Auto has announced that it is setting up a Rs3bn dedicated electric vehicle
manufacturing plant in Akurdi with a capacity of 500,000 units per annum offering it
ample future capacity to sell into the presently ~250,000 volume market, in its first
phase of product introduction in this category.
3 March 2022 12
Exhibit 25: Bajaj has low exposure to scooters & mopeds which are Exhibit 26: Bajaj presently has only ~4% market share in India’s
more at risk from EV led disruption high speed electric scooter market
As of 9MFY22
Scooters & Mopeds as % of Total Volumes (FY22E) MEW EV, 1% Gemopai, 1%

Jitendra KLB Komaki, 1%
50% EV, 1% Benling, 3%
46% Others, 2%
45% TVS, 3%
40% Bajaj Chetak,
4%
35% Revolt, 4%
30% Hero Electric,
31%
25%
Ampere, 8%
20%
15% Pure EV,
8%
10% 7%
Okinawa, 22%
Ather, 11%
5%
0%
0%
Bajaj Hero TVS
Source: Goldman Sachs Global Investment Research, SIAM Source: Company data, Vahan
Exhibit 27: Bajaj is in the process of raising its capacity to 500k

electric scooter units per year from a ~10k units number in our view
0.50
10,000 unit order

backlog as in Feb 2022
0.01
Bajaj
Current Capacity Estimate Capacity Plan
3 March 2022 13
Our analysis indicates up to 5% EPS upside if captive financing unit turns

fully functional
Bajaj Auto in its Board meeting held on October 27, 2021 passed a resolution to apply for
the formation of a non-banking finance company (NBFC) to offer captive auto financing.
To gauge the potential contribution of this captive auto financing unit, we present the
below scenario analysis.
For illustration purposes, we consider various scenarios of captively financed domestic

sales in FY25E (5%-20%; this references the range that Hero MotoCorp and TVS Credit
were able to achieve in their first five years of operations) and ROA (1%-4%; this
references typical ROAs that NBFCs in India have been able to achieve historically) to
determine the potential PAT/EPS and valuation impact. Our analysis implies that Bajaj
could earn between 1% to 5% additional EPS in FY25E vs. FY22E from captive
financing operations (assuming first full year of earnings contribution in FY25E). We
apply a 10x P/E on the additional EPS potential of Bajaj’s captive auto financing unit
(consistent with the 10-year median multiple of listed transport financing companies in
India, namely Cholamandalam Investment Finance Corporation, L&T Financial Holdings,
Muthoot Capital Services, Mahindra & Mahindra Financial Services and Shriram
Transport Finance) vs. the 17x P/E applied to Bajaj Auto’s core business. This implies up
to 2% upside optionality from captive financing to our Bajaj Auto valuation.
3 March 2022 14
Exhibit 28: Our scenario analysis indicates the proposed captive auto financing unit could add up to 5%
EPS in FY25E vs. FY22E and 2% upside optionality to our valuation
FY22E FY25E
GSe Bajaj Auto PAT (Rs mn) 46,988 83,650
GSe Bajaj Auto Domestic Revenue (Rs mn) 155,802 307,828
Captively financed Book Size in FY25E

as % of FY25E Domestic Sales
PAT (Rs mn) 5.0% 8.0% 12.0% 15.0% 18.0% 20.0%
1.0% 154 246 369 462 554 616
2.0% 308 493 739 923 1,108 1,231
ROA
3.0% 462 739 1,108 1,385 1,662 1,847
4.0% 616 985 1,478 1,847 2,216 2,463
% EPS / PAT accretion vs GSe FY22 estimates

1.0% 0% 1% 1% 1% 1% 1%
2.0% 1% 1% 2% 2% 2% 3%
ROA
3.0% 1% 2% 2% 3% 4% 4%
4.0% 1% 2% 3% 4% 5% 5%
Rs. Incremental EPS accretion in FY25E

1.0% 0.5 0.9 1.3 1.6 1.9 2.1
2.0% 1.1 1.7 2.6 3.2 3.8 4.3
ROA
3.0% 1.6 2.6 3.8 4.8 5.7 6.4

4.0% 2.1 3.4 5.1 6.4 7.7 8.5
Valuation upside if we apply 10x P/E on FY25E Captive financing ops

Rs.
Incremental EPS and discount back at 12% WACC
1.0% 4.7 7.6 11.4 14.2 17.1 19.0
2.0% 9.5 15.2 22.8 28.5 34.2 38.0
ROA
3.0% 14.2 22.8 34.2 42.7 51.3 57.0

4.0% 19.0 30.4 45.6 57.0 68.4 76.0
% Upside optionality from Captive financing operation

1.0% 0% 0% 0% 0% 0% 0%
2.0% 0% 0% 1% 1% 1% 1%
ROA
3.0% 0% 1% 1% 1% 1% 1%
4.0% 0% 1% 1% 1% 2% 2%
Source: Goldman Sachs Global Investment Research
Exhibit 29: Our analysis indicates up to 2% valuation upside

optionality from captive financing operations
Upside optionality to Bajaj Target Price from Captive

financing
2%
1.8%
2%
2%
1%
1%
1%
1%
1% 0.4%
0%
0%
0%
Low end of scenario - 5% of Domestic Sales High end of scenario - 20% of domestic sales
financed captively financed captively at 4% ROA
3 March 2022 15
Strategic partnership with Yulu for micromobility
In 2019, Bajaj Auto invested US$8 million in Yulu, a micromobility provider which is
present in three major metro cities in the country. Yulu operates in the shared electric
mobility space in India and focuses on mobility as a service (Maas) where the
pay-as-you-go concept could bridge the affordability gap for 2W ownership. This shared
mobility investment gives Bajaj access to last mile and first mile connectivity and gives
insight into how the low speed delivery segment is shaping in India. Yulu can support
delivery partners who don’t have a license or a 2W. They can use Yulu vehicles to cover
distances of around 70-80kms to make an average of 20 deliveries at a cost of around
Rs10/km. Yulu’s scooter currently offers a top speed of 25kmph, a range of 60 km and is
powered by a 48 volt motor. It is designed by Yulu and is being built in China and
assembled in India by Bajaj Auto.
Exhibit 30: Yulu funding rounds Exhibit 31: Bajaj Auto’s current and future investment plans in Yulu
Date Funding type Amount raised (USD mn) Investment details (per recent press reports, actuals could vary)
Bajaj's stake in Yulu 18%
Dec-21 Debt financing 7.0 Bajaj's initial investment amount (Nov 2019)* $8 million
Jun-20 Equity financing 3.9 Total funding raised by Yulu $26.9 million
Yulu's valuation (June 2020)* $77 million
Feb-20 Equity financing 1.0 Future plans
Nov-19 Equity financing 8.0 New Yulu built together with Bajaj planned to be launched in 2022
expected to add 5000-7000 vehicles per month eventually
Jul-18 Equity financing 7.0 Aims to expand current fleet of 10K to 70-80K by Sep 2022.
Total funding raised 26.9 Yulu: Planning to raise $40m in equity funding which hasn’t materialized yet
*last available data
*highlighted in red is the round led by Bajaj Auto
*highlighted in orange is the round where Bajaj Auto was also an
investor
Source: Crunchbase Source: Company data
From Feb 2020 to Feb 2021, Bajaj’s revenue expanded by 2.5x and its fleet size also
grew 2.5x. Now, along with Yulu - Bajaj is developing a low speed vehicle which is
planned for launch in 2022. With this new EV rollout with Bajaj, Yulu expects to add
5,000-7,000 vehicles per month eventually. Yulu has a current fleet size of 10,000
vehicles across 3 cities and aims to expand this to 70,000-80,000 vehicles by Sept
2022. Bajaj Auto is helping Yulu to shift its supply chain from China to India by building a
more affordable alternative. According to a Yulu official, this vehicle will be a single
seater, low power electric scooter with a price of around Rs30,000-35,000, bringing it
down from an earlier price of Rs40,000.
3 March 2022 16
Exhibit 32: Specifications of new product being built together by

Bajaj Auto and Yulu
New product specifications
Built together by Bajaj and Yulu
Single seater, low power electric scoote
Range: 60 km
Max speed: 25kmph
Luggage carrying capacity: 12 kg
No driving license required
Price: 30,000-35000 (from 40,000 earlier)
Launch timeline: 2022

Financial snapshot
Income statement
Growth: We forecast sales to grow at a +14% CAGR (FY22E-FY25E), led by: (1) Cyclical
recovery in 3W market (~20% of Bajaj’s topline); (2) Response to recent launch of Pulsar
250; (3) Steady momentum for both 2W and 3W exports; (4) Benefits of recent price
hikes (FY22E ASPs up 8% yoy); and (5) Pickup in CNG 3Ws on Indian roads (Bajaj has
~70% market share in the Indian 3W market). These factors drive our
+17%/+12%/+12% revenue growth assumptions in FY23E/FY24E/FY25E.
Margin outlook: We expect Bajaj Auto to expand EBITDA margin from 15.5% in FY22E
to 18.6% in FY25E helped by: (1) Increase in mix of higher margin 3W volume recovery;
(2) Positive effect of recent price hikes in domestic portfolio flowing through to EBITDA;
and (3) Improving procurement capabilities as Bajaj is now neck to neck with Hero as
India’s largest 2W manufacturer by volume (domestic + exports).
Cash flow statement

Capex: We expect Bajaj’s low capex requirement to continue given the company’s
ample land parcels and therefore limited fresh investment requirement for major
capacity expansions. The electric scooter plant in Akurdi is being set up in 1HCY21 with
~500k units capacity which should give Bajaj the optionality to increase supply of its
Chetak electric scooter in tandem with the electronic chip supply situation improving as
well as market inflection points over the next couple of years. We expect Bajaj to invest
~1% of its sales on capex over FY22E-FY25E.
Dividends: Bajaj’s dividend distribution target is for up to 90% pay out ratio when the
surplus cash + marketable securities are over Rs150bn. If the surplus is between
Rs75bn to 150bn, it would be up to 70% and if surplus is below Rs75bn, the payout
3 March 2022 17
ratio would be up to 50%. We expect near-term dividends to be at the 90% payout level
and if Bajaj obtains approval to run its own NBFC, the company should be able to
sustain at around 70% payout ratio in our view over the medium term, in line with its
dividend policy.
Balance sheet
Gearing: We forecast Bajaj’s net debt (cash)/equity to improve from -0.3x to -0.5x over
FY22E to FY25E and net debt (cash)/EBITDA ratio to improve from -1.6x to -1.8x over the
same period as the company builds its cash balance for investments in its proposed
captive financing entity as well as for electrification-related ecosystem investments and
partnership enhancement with KTM (Pierer Mobility AG).
Returns: We forecast ROE to increase to 26% in FY24E vs. 14% in FY20. This
improvement is largely driven by: (1) Increase in mix of higher margin 3W volume
recovery; and (2) Positive effect of recent price hikes in domestic portfolio flowing
through to EBITDA.
3 March 2022 18
Exhibit 33: Bajaj Auto - Summary financials
Profit model (Rs mn) 3/21 3/22E 3/23E 3/24E Balance sheet (Rs mn) 3/21 3/22E 3/23E 3/24E
Total revenue 277,410.8 333,817.8 390,339.4 438,948.3 Cash & equivalents 85,554.7 84,460.4 92,916.0 129,303.6
Cost of goods sold (196,096.5) (246,544.8) (282,186.0) (314,570.3) Accounts receivable 27,168.5 30,180.8 23,130.8 26,512.0
SG&A (19,169.9) (21,635.6) (24,786.6) (27,653.7) Inventory 14,938.9 14,502.6 13,489.0 13,141.9
R&D -- -- -- -- Other current assets 14,089.2 14,089.2 14,089.2 14,089.2
Other operating profit/(expense) -- -- -- -- Total current assets 141,751.3 143,233.0 143,625.0 183,046.7
EBITDA 49,284.8 51,823.1 67,363.0 79,166.3 Net PP&E 38,594.8 41,191.0 43,198.0 36,113.0
Depreciation & amortization (2,592.8) (2,703.8) (2,943.0) (3,085.1) Net intangibles 473.0 473.0 473.0 473.0
EBIT 46,692.0 49,119.3 64,419.9 76,081.2 Total investments 134,010.1 134,010.1 134,010.1 134,010.1
Interest income -- -- -- -- Other long-term assets -- -- -- --
Interest expense (66.6) (75.7) (63.1) (51.4) Total assets 315,302.0 319,380.0 321,778.9 354,115.5
Income/(loss) from uncons. subs. -- -- -- --
Others 12,764.6 11,958.7 12,467.6 15,908.2 Accounts payable 44,526.1 43,905.2 40,409.4 51,720.8
Pretax profits 59,390.0 61,002.3 76,824.4 91,938.0 Short-term debt -- -- -- --
Income tax (13,844.1) (14,014.0) (17,876.4) (21,854.0) Other current liabilities 11,906.0 11,906.0 11,906.0 11,906.0
Minorities -- -- -- -- Total current liabilities 56,432.1 55,811.2 52,315.4 63,626.8
Long-term debt -- -- -- --
Net income pre-preferred dividends 45,545.9 46,988.3 58,948.0 70,084.0 Other long-term liabilities 6,847.3 6,847.3 6,847.3 6,847.3
Preferred dividends -- -- -- -- Total long-term liabilities 6,847.3 6,847.3 6,847.3 6,847.3
Net income (pre-exceptionals) 45,545.9 46,988.3 58,948.0 70,084.0 Total liabilities 63,279.4 62,658.5 59,162.7 70,474.1
Post-tax exceptionals -- -- -- --
Net income 45,545.9 46,988.3 58,948.0 70,084.0 Preferred shares -- -- -- --
Total common equity 252,022.6 256,721.4 262,616.2 283,641.4
EPS (basic, pre-except) (Rs) 157.40 162.38 203.71 242.20 Minority interest -- -- -- --
EPS (basic, post-except) (Rs) 157.40 162.38 203.71 242.20
EPS (diluted, post-except) (Rs) 157.40 162.38 203.71 242.20 Total liabilities & equity 315,302.0 319,380.0 321,778.9 354,115.5
DPS (Rs) 140.00 146.14 183.34 169.54
Dividend payout ratio (%) 88.9 90.0 90.0 70.0 BVPS (Rs) 870.94 887.18 907.55 980.21
Free cash flow yield (%) 3.2 4.2 6.3 8.8
Growth & margins (%) 3/21 3/22E 3/23E 3/24E Ratios 3/21 3/22E 3/23E 3/24E
Sales growth (4.7) 20.3 16.9 12.5 CROCI (%) 15.8 19.0 27.4 41.0
EBITDA growth 14.9 5.2 30.0 17.5 ROE (%) 20.2 18.5 22.7 25.7
EBIT growth 15.5 5.2 31.1 18.1 ROA (%) 16.2 14.8 18.4 20.7
Net income growth 6.3 3.2 25.5 18.9 ROACE (%) 27.2 27.8 34.5 43.3
EPS growth 6.3 3.2 25.5 18.9 Inventory days 23.8 21.8 18.1 15.5
Gross margin 29.3 26.1 27.7 28.3 Receivables days 29.2 31.4 24.9 20.6
EBITDA margin 17.8 15.5 17.3 18.0 Payable days 71.1 65.5 54.5 53.4
EBIT margin 16.8 14.7 16.5 17.3 Net debt/equity (%) (33.9) (32.9) (35.4) (45.6)
Interest cover - EBIT (X) 701.1 648.9 NM NM
Cash flow statement (Rs mn) 3/21 3/22E 3/23E 3/24E Valuation 3/21 3/22E 3/23E 3/24E
Net income pre-preferred dividends 45,545.9 46,988.3 58,948.0 70,084.0
D&A add-back 2,592.8 2,703.8 2,943.0 3,085.1 P/E (analyst) (X) 19.9 20.8 16.6 13.9
Minorities interests add-back -- -- -- -- P/B (X) 3.6 3.8 3.7 3.4
Net (inc)/dec working capital (7,207.2) (3,196.9) 4,567.8 8,277.3 EV/EBITDA (X) 16.6 17.2 13.1 10.7
Other operating cash flow (9,792.9) -- -- -- EV/GCI (X) 2.8 2.9 4.2 4.3
Cash flow from operations 31,138.6 46,495.2 66,458.8 81,446.3 Dividend yield (%) 4.5 4.3 5.4 5.0
Capital expenditures (2,508.7) (5,300.0) (4,950.0) 4,000.0

Acquisitions -- -- -- --
Divestitures -- -- -- --
Others (26,144.8) -- -- --
Cash flow from investments (28,653.5) (5,300.0) (4,950.0) 4,000.0
Dividends paid (common & pref) (87.3) (42,289.5) (53,053.2) (49,058.8)

Inc/(dec) in debt -- -- -- --
Common stock issuance (repurchase) -- -- -- --
Other financing cash flows 52,276.7 -- -- --
Cash flow from financing 52,189.4 (42,289.5) (53,053.2) (49,058.8)
Total cash flow 54,674.5 (1,094.3) 8,455.6 36,387.5 Note: Last actual year may include reported and estimated data.
3 March 2022 19
Exhibit 34: GS Bajaj Auto FY22E to FY25E forecasts
Bajaj Auto
FY21 FY22 FY23 FY24 FY25
In Rs millions Annual Estimate Estimate Estimate Estimate
Revenues (net) 271,329 324,103 379,896 426,172 477,160
yoy % 19.5% 17.2% 12.2% 12.0%
Other operating income 6,082 9,715 10,444 12,776 15,602
Total Revenues 277,411 333,818 390,339 438,948 492,762

yoy % 20.3% 16.9% 12.5% 12.3%
Dec/(inc) in stock 2,195 (3,372) - - -
Raw material (183,081) (229,036) (282,186) (314,570) (350,667)
Purchase of traded goods (15,210) (14,137) - - -
RM as % of sales 70.7% 73.9% 72.3% 71.7% 71.2%
Staff costs (12,860) (13,814) (16,004) (17,558) (19,710)
Staff costs as % of sales 4.6% 4.1% 4.1% 4.0% 4.0%
Other expenses (19,293) (21,746) (24,787) (27,654) (30,551)
Other expenses as % of sales 7.0% 6.5% 6.4% 6.3% 6.2%
Expenses capitalized 123 110 - - -
Total Expenditure (228,126) (281,995) (322,976) (359,782) (400,929)
EBITDA 49,285 51,823 67,363 79,166 91,833

EBITDA margin (%) 17.8% 15.5% 17.3% 18.0% 18.6%
Depreciation (2,593) (2,704) (2,943) (3,085) (3,210)

as % of Sales 0.9% 0.8% 0.8% 0.7% 0.7%
EBIT 46,692 49,119 64,420 76,081 88,622
Interest (67) (76) (63) (51) (42)
Other Income 12,765 11,959 12,468 15,908 21,879

as % of Sales 4.6% 3.6% 3.2% 3.6% 4.4%
PBT - pre exceptionals 59,390 61,002 76,824 91,938 110,460
Extraordinary items
PBT - post exceptionals 59,390 61,002 76,824 91,938 110,460
Tax (13,844) (14,014) (17,876) (21,854) (26,810)

Effective tax rate (%) 23.3% 23.0% 23.3% 23.8% 24.3%
Reported Profit 45,546 46,988 58,948 70,084 83,650

% margin 16.4% 14.1% 15.1% 16.0% 17.0%
Adjusted Net Profit 45,546 46,988 58,948 70,084 83,650

% margin 16.4% 14.1% 15.1% 16.0% 17.0%
# of shares (mn) 289 289 289 289 289

EPS (INR) 157.4 162.4 203.7 242.2 289.1
yoy% 25.5% 18.9% 19.4%
3 March 2022 20
Exhibit 35: Bajaj Auto - GS segmental forecasts

Goldman Sachs MidCap Research
Bajaj Auto xxxxx 3/3/2022
Segmental Forecasts
FYE March 31 2019 2020 2021 2022E 2023E 2024E 2025E
Net Sales 295,673 291,115 271,329 324,103 379,896 426,172 477,160
Exports Wholesales 2,078,730 2,171,045 2,054,247 2,501,762 2,691,455 2,895,802 3,098,417
Export Revenue (Rs. mn) 117,717 127,280 125,240 171,934 190,493 213,155 237,193
yoy % 21% 8% -2% 37% 11% 12% 11%
Export ASP (Rs.) 56,629 58,626 60,966 68,725 70,777 73,608 76,553
yoy % -3% 4% 4% 13% 3% 4% 4%
Total Wholesales 5,015,354 4,615,212 3,972,858 4,378,484 4,965,916 5,363,319 5,779,467

yoy % 25% -8% -14% 10% 13% 8% 8%
Domestic wholesales 2,936,624 2,444,167 1,918,611 1,876,722 2,274,461 2,467,517 2,681,050
yoy % 25% -17% -22% -2% 21% 8% 9%
Domestic Revenue (Rs. mn) 177,955 163,835 146,089 152,169 189,402 213,017 239,967
yoy % 19% -8% -11% 4% 24% 12% 13%
Domestic ASP (Rs.) 60,599 67,031 76,143 83,029 83,274 86,329 89,505
yoy % -5% 11% 14% 9% 0% 4% 4%
Operating Revenue 295,673 291,115 271,329 324,103 379,896 426,172 477,160

18% -2% -7% 19% 17% 12% 12%
# units 5,015,354 4,615,212 3,972,858 4,378,484 4,965,916 5,363,319 5,779,467
yoy % 25% -8% -14% 10% 13% 8% 8%
ASP (Rs.) 58,953 63,077 68,296 74,022 76,501 79,461 82,561
yoy % -6% 7% 8% 8% 3% 4% 4%
GSe vs. consensus

We expect Bajaj Auto to grow sales by +20%/+17%/+12% yoy in FY22E/FY23E/FY24E.
Our FY24E sales/EBITDA/EPS estimates are 2%/6%/6% above consensus. We expect
Bajaj’s disproportionate exposure in higher margin and cyclically recovering 3Ws as well
as potential upside in CNG 3W sales from ongoing CNG fuel pump network expansion
to support earnings growth going forward. We also expect Bajaj’s steady progress in
export market penetration to continue, as multiple markets in Africa and neighboring
Indian countries are at the early innings of improving 2W penetration.
Exhibit 36: GSe vs. consensus

in Rs. mn GS vs Consensus GSe Consensus
Year FY21 FY22 FY23 FY24 FY22 FY23 FY24 FY22 FY23 FY24
Sales 277,411 -1.3% 0.6% 1.6% 333,818 390,339 438,948 338,334 387,843 432,033
yoy gr 20% 17% 12% 22% 15% 11%
EBITDA 49,285 -2.3% 3.9% 5.9% 51,823 67,363 79,166 53,030 64,807 74,758
margin 17.8% -15 bps 55 bps 73 bps 15.5% 17.3% 18.0% 15.7% 16.7% 17.3%
yoy gr 5% 30% 18% 8% 22% 15%
EPS (in Rs.) 157.4 -3.9% 1.3% 5.7% 162.4 203.7 242.2 169.0 201.1 229.1
yoy gr 3% 25% 19% 7% 19% 14%
Source: I/B/E/S, Goldman Sachs Global Investment Research
Valuation
Bajaj Auto trades at 16.6x 1-yr fwd P/E vs. its peers at 18.5x and its own 10-year average
of 17.0x. We value the stock using a P/E-based SOTP framework that includes the core
2W + 3W manufacturing business and Bajaj Auto’s stake in PTW Holding (which owns
3 March 2022 21
listed Austrian manufacturer of KTM and Husqvarna motorcycles, Pierer AG). We expect
Bajaj Auto to grow sales/EBITDA/EPS by +14%/+21%/+21% annually over FY22E to
FY25E. Our FY24E EPS estimate is 6% above IBES consensus. We like Bajaj Auto’s
growth prospects because of its export leadership position giving it comfort in the
scenario that rural remains weak in post COVID era. It is positioned well to benefit from
the Indian government’s planned expansion in CNG stations network as well as its
re-entry into the electric scooter market with Bajaj Chetak. We initiate with a Buy rating
and a 12-month target price of Rs4,270 implying 27% upside (based on March 2 closing
price).
Exhibit 37: Bajaj 10-year historical fwd P/E Exhibit 38: India 2W companies - Historical fwd P/E trend
I/B/E/S
Bajaj 10 year hist P/E fwd India 2W Fwd P/E progression

24.0x 45.0x Bajaj P/E fwd TVS P/E fwd Hero P/E fwd
22.0x 40.0x
35.0x
20.0x
18.9x 30.0x
18.0x
16.9x 25.0x
16.0x 23.3x
14.9x 20.0x
14.0x 17.8x
15.0x 14.5x
12.0x
10.0x
10.0x 5.0x
0.0x
Bajaj P/E fwd Median +1 SD -1 SD
Source: Datastream Source: Datastream
Exhibit 39: Bajaj Auto - GS target price methodology

P/E based SOTP Valuation
Bajaj Auto Pierer AG
Stake (through
Target Price Standalone Total
PTW Holding)
Methodology Q5 to Q8 Q5 to Q8
PAT (Rs. mn) 66,948
# shares (mn) 289 289
EPS (Rs.) 231.4
Market cap (Rs. mn) 270,000
PTW Holding stake in Pierer AG 73.3%
Bajaj Auto stake in PTW Holding 49.9%
P/E fwd 17x
Target Price (Rs per share) 3,930 340 4,270

% of TP 92% 8% 100%
Rationale for Multiples

Standalone: Based on Historical 10 year average P/E
Pierer AG: Based on proportionate stake of Market cap
1CHF=1.09USD; 1USD=75INR
3 March 2022 22
Potential catalysts
Going forward, we see the following events as key potential catalysts for the stock:
Response to new Pulsar 250 launch: Bajaj Auto launched its new 250 cc model on a
brand new platform on October 28, 2021. The national roll out is still unfolding and as the
semiconductor supply situation normalizes, customers who wish to upgrade from lower
cc versions could represent more revenue visibility for the company.
Progress on government’s CNG station network expansion: An on-track rollout of

the CNG network expansion by the Indian government can accelerate earnings potential
as the CNG 3W (Bajaj RE CNG) which is priced on par with the petrol version becomes a
more meaningful earnings contributor for the company.
Domestic 3W market revival: Domestic 3W sales as of January 2022 remained

50%-60% lower than pre-Covid levels. As the economy reopens for passenger
transportation post Omicron, a rebound in domestic 3W demand bodes well for Bajaj
Auto’s earnings potential over the medium term.
Key downside risks
Electric scooter threats from new age OEMs: Bajaj Auto has been absent from the
scooter category for >15 years — it has only recently re-entered the space with Electric
Chetak, but if new age electric scooter OEMs are able to outdo Bajaj’s Chetak in both
product and pricing strategy, there could be a more competitive near-term situation for
Bajaj to deal with both in terms of electric scooter market share and profitability.
Accumulation of non-performing loans in proposed NBFC: With its proposed new

captive financing unit, there is a potential risk scenario where the accumulation of
non-performing loans can reduce profitability if lending practices include too many
sub-prime customers.
65% dependency on Pulsar/Boxer product ranges: Bajaj Auto’s Pulsar and Boxer
ranges collectively represent ~65% of the company’s volumes. This level of dependence
on two brand families does represent concentration risk, in our view, if these segments
are challenged by new products from competitors or if there are recalls specific to these
brands.
Prolonged slowdown in domestic rural customer segment: ~24% of Bajaj Auto’s

annual volumes are from rural India which has found it hard to digest the 30%+ price
hikes witnessed over the past three years amidst a period of income uncertainty during
the Covid pandemic. If the rural rebound takes longer to play out, this represents some
risk to Bajaj’s ability to register volume recovery in the post Covid reopening phase.
Fast followers in export markets: Bajaj Auto’s current Executive Director, Rakesh
Sharma has earlier during his stint as Head of International business, been instrumental
in building Bajaj’s franchise in key export markets. TVS has also been able to replicate
3 March 2022 23
some of Bajaj’s exports success more recently and Hero is beginning to get more active
on this front though off a small base. While Bajaj is more than 2x its nearest competitors
in 2W exports out of India, the increasing interest from competitors in exports
represents some risk to further progress.
Delay in domestic 3W market recovery: The domestic 3W market is still ~70% lower
than pre-Covid levels. Further waves of Covid could pressure the pace of recovery in the
3W demand cycle and this scenario could impact margin recovery for Bajaj Auto, given
the higher margin dynamics in the 3W business.
Scenario analysis
We model potential divergences from our base case assumptions and assess
consequent benefit/impact to Bajaj Auto’s earnings potential and implied valuation in our
bull, bear and base case scenarios.
Base case (26% upside): Assumes that Bajaj Auto grows its topline at +14.8% in the
Q5 to Q8 period with gradual recovery in 3W volumes and moderate ability to pass on
any raw material price volatility (~16.0% pat margin).
Bear case (14% downside): Assumes 500bps slower topline growth vs. our base case
in the event of slower market growth and macro situation, and PAT margins impacted by
250bps vs. our base case on the back of limited ability to pass on cost increases and
associated negative operating leverage. We apply 15% lower P/E (referencing historical
correction periods for the stock) in our bear case vs. our base case.
Bull case (48% upside): Assumes 100bps faster topline growth vs. our base case if
rural 2W consumption picks up faster than expected and export market penetration and
CNG 3W market expansion both benefit Bajaj more than what we have assumed in our
base case. We expect 100bps higher PAT margin in the event that raw material prices
cool off and operating leverage from our bull case growth flows through. We apply 10%
higher P/E (referencing historical upward rerating periods for the stock) in our bull case
vs. our base case.
3 March 2022 24
Exhibit 40: Bajaj Auto scenario analysis

Historical
Bear Base Bull
Context
FY10 to
Q5 to Q8 Q5 to Q8 Q5 to Q8 Remarks
FY19
Sales 408,027 426,613 430,330

yoy gr 9.8% 14.8% 15.8% 11.1%
Base case: Assumes that Bajaj Auto grows
Assumptions topline at +14.8% with gradual recovery in 3W
volumes and moderate ability to pass on any raw
PAT 53,831 66,948 71,835 material price volatility.
margin 13.2% 15.7% 16.7% 13.7%
Bear case: Assumes 500bps slower topline
EBITDA 62,408 75,916 80,881 growth vs base case in event of slower market
margin 15.3% 17.8% 18.8% 17.2% growth and macro situation and PAT margins
impacted by 250bps vs base case. Apply 15%
Applied P/E 15.7x 18.5x 20.3x 16.9x lower P/E in Bear case vs Base case.
Premium / Discount -15% 0% 10%
Bull case: Assumes 100bps faster topline
Equity Value 844,476 1,235,597 1,458,364 growth vs Base case and 100bps higher PAT
# shares 289 289 289 margin as operating leverage flows through.
Apply 10% higher P/E in Bull case vs Base case.
Implied valuation 2,920 4,270 5,040
Upside / Downside -14% 26% 48%
M&A Framework: Rank of 3
Across our coverage universe, we examine stocks using an M&A framework,

considering both qualitative and quantitative factors to incorporate the potential that
certain companies could be acquired at a premium to current share prices. We then
assign an M&A rank as a means of scoring companies under our rated coverage from 1
to 3, with 1 representing high (30%-50%) probability of the company becoming an
acquisition target, 2 representing medium (15%-30%) probability and 3 representing low
(0%-15%) probability. For companies ranked 1 or 2, in line with our standard
departmental guidelines we incorporate an M&A component into our target price. M&A
rank of 3 is considered immaterial and therefore does not factor into our price target,
and may or may not be discussed in research.
We consider mostly quantitative factors to evaluate the M&A probability for each
company such as market cap, free float, ownership structure, financial strength, returns,
top-line growth and valuation. We then allocate scores between 1 and 3 (relative to the
broader India Autos industry), 1 being a favorable M&A input score on the factor and 3
being an unfavorable M&A input score on the factor. The individual factor scores are
then averaged out to obtain a final M&A score between 1 and 3. Within this context,
Bajaj Auto scores unfavorably as an M&A target especially on metrics like promoter
ownership, free float and market cap.
3 March 2022 25
Exhibit 41: Bajaj Auto - M&A rank of 3 (low probability of being acquired)
Company M&A Promoter ownership Free Float Mkt Cap Sales (FY22E-FY25E) EBITDA (FY22E-FY25E)
name Rank % Score % Score USD mn Score CAGR Score CAGR Score
Bajaj Auto 3 54% 3 42% 3 12,892 3 14% 3 21% 2
Company M&A EPS (FY22E-FY25E) CROCI (FY23E) PE (FY23E) Net debt / EBITDA FCF Yield (FY23E)
name Rank CAGR Score % Score x Score x Score % Score
Bajaj Auto 3 21% 3 27% 1 16.6x 3 -1.4x 2 6% 1
Promoter ownership: We believe a higher strategic holding by founder promoters

(score of 1 for a below 20% stake held, score of 2 for 20%-30%, and score of 3 for 30%
or above) implies a lower M&A probability.
Free float: We believe a relatively lower free float (score of 1 for above 60%, score of 2
for 50%-60%, and score of 3 for below 50%) implies a lower M&A probability.
Market cap: We believe a relatively higher market cap (score of 1 for below US$3bn,
score of 2 for US$3bn-US$5bn, and score of 3 for US$5bn and above) implies a low
M&A probability.
Sales growth: We believe a relatively low sales growth (score of 1 for above 25%,
score of 2 for 15%-25%, and score of 3 for below 15%) implies a low M&A probability.
EBITDA growth: We believe a relatively moderate EBITDA growth (score of 1 for above
25%, score of 2 for 15%-25%, and score of 3 for below 15%) implies a moderate M&A
probability.
EPS growth: We believe a relatively low EPS growth (score of 1 for above 25%, score
of 2 for 20%-25%, and score of 3 for below 20%) implies a low M&A probability.
CROCI: We believe a relatively high CROCI (score of 1 for above 25%, score of 2 for
20%-25%, and score of 3 for below 20%) implies a high M&A probability.
P/E: We believe a relatively low P/E (score of 1 for below 5x, score of 2 for 5x to 10x,
and score of 3 for 10x and above) implies a high M&A probability.
Net debt/EBITDA: We believe a relatively low net debt/EBITDA position (score of 1 for
below -2.0x, score of 2 for -2.0x to 0.0x, and score of 3 for 0.0x and above) implies a
high M&A probability.
FCF yield: We believe a relatively high cash flow yield (score of 1 for 5% and above,
score of 2 for 1% to 5%, and score of 3 for below 1%) implies a high M&A probability.
3 March 2022 26
Appendix
What does the company do?

Bajaj Auto is an Indian two- and three-wheeler manufacturer based in Pune,
Maharashtra. Its product offerings include motorcycles, scooters and rickshaws (3Ws). It
is ranked as the world’s fourth largest two- and three-wheeler manufacturer. Bajaj Auto
also introduced the Indian market to the first ever quadricycle - Qute. It is a major export
player with ~51% of the company’s revenues coming from exports.
Exhibit 42: 54% of Bajaj’s FY21 volumes were from exports Exhibit 43: Higher margin 3Ws were only 9% of Bajaj’s FY21
As of FY21 volumes (due to Covid-led slowdwon in 3W usage) but has
potential to rebound to ~16% volume contribution levels of FY19
As of FY21
Export Volumes Domestic Volumes

3Ws, 9%
Export
Volumes, 46%
Domestic
Volumes, 54%
2Ws, 91%
Source: Company data Source: Company data
Management background
Niraj Bajaj, Chairman
Niraj Bajaj is on the Board of Directors for Bajaj Group. After the resignation of the late
Rahul Bajaj on 30 April 2021, Niraj Bajaj was appointed as the Chairman of the company
with effect from May 1, 2021. He joined the Board of Bajaj in September 2006 and is
also one of the Promotor-Directors of Bajaj Group.
Madhur Bajaj, Vice Chairman

Madhur Bajaj is the Director and Vice Chairman of Bajaj Auto. He started his journey
with Bajaj after his MBA as a General Manager of the Aurangabad Division in June 1986.
He became Chief Executive in October 1988, and took over the role of President of Bajaj
Auto in September 1994. He has been an Executive Director since May 2000 and has
taken on his position as Vice Chairman since July 2001.
Rajiv Bajaj, Managing Director & CEO

Rajiv Bajaj, who is the Managing Director and CEO, has been working in Bajaj Auto since
1990. For the first five years, he was working in manufacturing and supply chain.
Subsequently, he worked in R&D and Engineering from 1995-2000 and eventually in the
Marketing and Sales division from 2000-2005. He has been Managing Director since
3 March 2022 27
April 2005.
Rakesh Sharma, Executive Director

Rakesh Sharma has been instrumental in building Bajaj Auto’s export franchise as Head
of International business between 2007 and 2018. Since 2019, Rakesh has been
Executive Director of the company. Prior to joining Bajaj, Rakesh spent 21 years in the
decorative paints industry building both domestic and export franchises at ICI Paints.
Balance sheet and Shareholding pattern
Exhibit 44: We expect Bajaj Auto’s net debt/EBITDA to improve Exhibit 45: Bajaj Auto’s shareholding pattern
slightly from -1.6x in FY22E to -1.8x in FY25E As of December 2021
FY20 FY21 FY22E FY23E FY24E FY25E Shareholding Pattern (%)

0.0x
-0.2x Retail / Corporate,
-0.2x
-0.4x 21%
-0.3x -0.3x -0.4x
-0.6x -0.5x
-0.5x
-0.8x -0.7x
-1.0x
Insurance cos / FI
-1.2x / Bank, 9% Promoter, 54%
-1.4x
-1.4x
-1.6x
-1.8x -1.6x -1.6x FPI, 12%
-1.7x -1.8x
-2.0x DMF, 4%
Net debt / Equity Net debt / EBITDA
Promoter DMF FPI Insurance cos / FI / Bank Retail / Corporate
Source: Company data, Goldman Sachs Global Investment Research Source: Bombay Stock Exchange
Exhibit 46: GS India 2W coverage Comp Sheet

India 2Ws Mkt Cap Valuation Current Target Upside/ P/E EV/EBITDA
Company ($mn) Rating Methodology Currency Price Price (12-m) Downside FY22E FY23E FY24E FY22E FY23E FY24E
Hero MotoCorp 6,433 Sell SOTP P/E INR 2,428 2,080 -14% 20.5x 17.1x 14.7x 13.2x 10.9x 8.9x
TVS Motor 3,769 Neutral SOTP P/E INR 598 640 7% 30.4x 22.2x 21.2x 14.6x 11.7x 11.1x
Bajaj Auto 12,955 Buy SOTP P/E INR 3,373 4,270 27% 20.8x 16.6x 13.9x 17.2x 13.1x 10.7x
2Ws Median 7% 20.8x 17.1x 14.7x 14.6x 11.7x 10.7x
India 2Ws Sales growth EBITDA margin EBITDA growth EPS growth Div Yield
Company FY22E FY23E FY24E FY22E FY23E FY24E FY22E FY23E FY24E FY22E FY23E FY24E FY23E
Hero MotoCorp -6% 16% 10% 11.3% 11.9% 12.6% -18% 22% 16% -20% 20% 17% 4%
TVS Motor 24% 15% 10% 9.5% 10.1% 9.8% 37% 24% 6% 53% 37% 4% 1%
Bajaj Auto 20% 17% 12% 15.5% 17.3% 18.0% 5% 30% 18% 3% 25% 19% 5%
2Ws Median 20% 16% 10% 11% 12% 13% 5% 24% 16% 3% 25% 17% 4%
FY22- FY22- FY22- FY25E

FY25E FY25E FY25E PAT vs
India 2Ws TP Implied P /E 10 yr avg CAGR CAGR CAGR FY19 ROE Net debt / EPS
Company FY22E FY23E FY24E P/E Sales EBITDA PAT PAT FY23E EBITDA FY22E FY23E FY24E
Hero MotoCorp 17.6x 14.7x 12.6x 15.8x 12% 18% 19% 20% 17% -1.3x 118.5 141.7 165.6
TVS Motor 32.6x 23.7x 22.7x 23.5x 12% 14% 18% 67% 24% 0.0x 19.7 27.0 28.2
Bajaj Auto 26.3x 21.0x 17.6x 17.0x 14% 21% 21% 59% 23% -1.4x 162.4 203.7 242.2
2Ws Median 26.3x 21.0x 17.6x 17.0x 12% 18% 19% 59% 23% -1.3x
Pricing as of March 2, 2022
Source: Datastream, Goldman Sachs Global Investment Research
3 March 2022 28
Disclosure Appendix
Reg AC
We, Chandramouli Muthiah, Kota Yuzawa and Rupanshi Bajaj, hereby certify that all of the views expressed in this report accurately reflect our personal
views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or
indirectly, related to the specific recommendations or views expressed in this report.
Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs’ Global Investment Research division.
GS Factor Profile
The Goldman Sachs Factor Profile provides investment context for a stock by comparing key attributes to the market (i.e. our coverage universe) and its
sector peers. The four key attributes depicted are: Growth, Financial Returns, Multiple (e.g. valuation) and Integrated (a composite of Growth, Financial
Returns and Multiple). Growth, Financial Returns and Multiple are calculated by using normalized ranks for specific metrics for each stock. The
normalized ranks for the metrics are then averaged and converted into percentiles for the relevant attribute. The precise calculation of each metric may
vary depending on the fiscal year, industry and region, but the standard approach is as follows:
Growth is based on a stock’s forward-looking sales growth, EBITDA growth and EPS growth (for financial stocks, only EPS and sales growth), with a
higher percentile indicating a higher growth company. Financial Returns is based on a stock’s forward-looking ROE, ROCE and CROCI (for financial
stocks, only ROE), with a higher percentile indicating a company with higher financial returns. Multiple is based on a stock’s forward-looking P/E, P/B,
price/dividend (P/D), EV/EBITDA, EV/FCF and EV/Debt Adjusted Cash Flow (DACF) (for financial stocks, only P/E, P/B and P/D), with a higher percentile
indicating a stock trading at a higher multiple. The Integrated percentile is calculated as the average of the Growth percentile, Financial Returns
percentile and (100% - Multiple percentile).
Financial Returns and Multiple use the Goldman Sachs analyst forecasts at the fiscal year-end at least three quarters in the future. Growth uses inputs
for the fiscal year at least seven quarters in the future compared with the year at least three quarters in the future (on a per-share basis for all metrics).
For a more detailed description of how we calculate the GS Factor Profile, please contact your GS representative.
M&A Rank
Across our global coverage, we examine stocks using an M&A framework, considering both qualitative factors and quantitative factors (which may vary
across sectors and regions) to incorporate the potential that certain companies could be acquired. We then assign a M&A rank as a means of scoring
companies under our rated coverage from 1 to 3, with 1 representing high (30%-50%) probability of the company becoming an acquisition target, 2
representing medium (15%-30%) probability and 3 representing low (0%-15%) probability. For companies ranked 1 or 2, in line with our standard
departmental guidelines we incorporate an M&A component into our target price. M&A rank of 3 is considered immaterial and therefore does not
factor into our price target, and may or may not be discussed in research.
Quantum
Quantum is Goldman Sachs’ proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for
in-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.
Disclosures
The rating(s) for Bajaj Auto is/are relative to the other companies in its/their coverage universe: Bajaj Auto
Company-specific regulatory disclosures

The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, “Goldman Sachs”) and companies covered
by the Global Investment Research Division of Goldman Sachs and referred to in this research.
There are no company-specific disclosures for: Bajaj Auto (Rs3,293.35)
Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global Equity coverage universe
Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell
Global 50% 35% 15% 65% 57% 47%
As of January 1, 2022, Goldman Sachs Global Investment Research had investment ratings on 3,096 equity securities. Goldman Sachs assigns stocks
as Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for
the purposes of the above disclosure required by the FINRA Rules. See ‘Ratings, Coverage universe and related definitions’ below. The Investment
Banking Relationships chart reflects the percentage of subject companies within each rating category for whom Goldman Sachs has provided
investment banking services within the previous twelve months.
3 March 2022 29
Price target and rating history chart(s)
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Bajaj Auto: Multiple Gears To Ride Into The Reopening Initiate at Buy

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Bajaj Auto: Multiple Gears To Ride Into The Reopening Initiate at Buy

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3 March 2022 | 8:24PM IST

Bajaj Auto (BAJA.BO)

BAJA.BO 12m Price Target: Rs4,270.00 Price: Rs3,293.35 Upside: 29.7%

domestic demand weakness; 2) upcoming cyclical recovery in

vs. the peer group, in our view.

Valuation: Our 12m TP of Rs4,270 is based on the SOTP Integrated

Bajaj Auto (BAJA.BO) Income Statement (Rs mn) _________________________________

Capital expenditures (2,508.7) (5,300.0) (4,950.0) 4,000.0

Repayment of lease liabilities -- -- -- --

Source: Company data, Goldman Sachs Research estimates.

Export cushion supportive in weak domestic demand environment 6

Higher margin 3W recovery led by government push in CNG network 8

Re-entry into fast growing scooter segment with Electric Chetak 12

Strategic partnership with Yulu for micromobility 16

Key downside risks 23

M&A Framework: Rank of 3 25

PM summary: Export cushion + 3W rebound + Attractive yield

Domestic 3W, Export 3W, 7%

Source: Company data, Goldman Sachs Global Investment Research

15% 60% 57%

CNG 3W registration as % of Total 3W Registrations Dividend yield (FY23E)

Source: Vahan Source: Goldman Sachs Global Investment Research

Export cushion supportive in weak domestic demand environment

India 20.0 40%

Vietnam 3.2 20%

Europe 1.9 5% 12% 11% 9%

Annual Global 2W mkt 60.4

Source: Euromonitor Source: Euromonitor

Higher margin 3W recovery led by government push in CNG network

Source: Vahan Source: Goldman Sachs Global Investment Research

Mahindra Treo (Passenger) 141 110 55

Mahindra Treo Yaari (Goods) 85 60 25

Piaggio E-Ape (Goods) 110 80 45

Euler (Goods) 151 110 42

Lohia Auto 110 80 25

Kinetic Green Safar (Passenger) 130 100 25

India E-3W median 80 25

India E-3W Requirement 110

Source: Company data

Refuelling / Charging time in mins

CNG Bajaj Compact RE CNG 227,000 61 1 kg 4.0 100 244 2.4

Electric Mahindra Treo 280,000 6.6 kWh 5.5 80 36 0.5

*pre registration, road tax, insurance

Source: Company data

Expected recovery in domestic 3W market to beneﬁt Bajaj more than peers: 3W

Re-entry into fast growing scooter segment with Electric Chetak

Scooters & Mopeds as % of Total Volumes (FY22E) MEW EV, 1% Gemopai, 1%

Exhibit 27: Bajaj is in the process of raising its capacity to 500k

10,000 unit order

Current Capacity Estimate Capacity Plan

Source: Company data, Goldman Sachs Global Investment Research

Our analysis indicates up to 5% EPS upside if captive ﬁnancing unit turns

For illustration purposes, we consider various scenarios of captively ﬁnanced domestic

Captively financed Book Size in FY25E

% EPS / PAT accretion vs GSe FY22 estimates

Rs. Incremental EPS accretion in FY25E

3.0% 1.6 2.6 3.8 4.8 5.7 6.4

Valuation upside if we apply 10x P/E on FY25E Captive financing ops

3.0% 14.2 22.8 34.2 42.7 51.3 57.0

% Upside optionality from Captive financing operation

Source: Goldman Sachs Global Investment Research

Exhibit 29: Our analysis indicates up to 2% valuation upside

Upside optionality to Bajaj Target Price from Captive