HOLD

Results Update Bajaj Auto Target Price

25th Jan 2024 Auto 7,050

Another Robust Quarter; Rich Valuation Factors in Positives

(CMP as of 24th Jan 2024)
Est. Vs. Actual for Q3FY24: Revenue – largely INLINE; EBITDA Margin – slight BEAT; PAT – slight BEAT
CMP (Rs) 7,206
Change in Estimates post Q3FY24: Upside /Downside (%) -2%
FY24E/FY25E: Revenue 1%/-1%; EBITDA 2.5%/1%; PAT 2.3%/1% High/Low (Rs) 7,420/3,625
Recommendation Rationale Market cap (Cr) 2,04,212

 The company’s focus continues on 1) Driving growth in the 125cc+ segment, by building the Avg. daily vol. (6m) Shrs. 4,86,040
Pulsar franchise through new launches and surpassing the current 31% market share in the mid- No. of shares (Cr) 28
segment, 2) Ensuring 80% market share in 3Ws and steadily expanding e-autos, 3) Ensuring
steady export recovery with a QoQ improvement in sales in every market, 4) Expanding Chetak
business to 15k/month through new launches, network expansion, and good supply chain Shareholding (%)
support, and 5) Scaling up the Triumph sales in India and to overseas market and leverage on Jun-23 Sep-23 Dec-23
KTM range.
Promoter 54.99 54.98 54.94
 Exports recovery will be more gradual than what was expected earlier. Disruptions at the Red FII 13.67 14.37 14.64
Sea have caused delays in shipments (~3 weeks at LATAM and parts of Africa), higher freight
rates and container availability issues which adds to the near-term headwind for export recovery. Mutual Funds / 3.75 4.70 5.32
Larger macro issues such as currency availability and inflation (especially in Nigeria) continue to UTI
Financial 0.03 0.06 0.00
persist. The export recovery will be now a more gradual MoM. Institutions
Others 27.56 25.89 25.10
 Chetak's market share increased to 14% in Dec’23 from 4% in FY23, breaching 10k retail
sales in Dec’23. This was led by i) Network expansion, as it’s now available in 140 cities across
Financial & Valuations
160 exclusive sales stores covering ~80% high-speed EV market. The company intends to further
increase its touchpoints through ii) Competitive pricing, iii) Easing supply chains and iv) Launching Y/E Mar (Rs Cr) FY24E FY25E FY26E
a new variant of Chetak. This has a higher top speed and has plugged some of the gaps in
Net Sales 43,600 52,240 59,902
connectivity and added better features, such as (TFT) over the earlier version. By Q1FY25, one
more product offering is in the pipeline which will boost sales. EBITDA 8,593 10,462 12,038
Adj. Net Profit 7,311 8,602 9,736
Sector Outlook: Cautiously positive
EPS (Rs.) 258.5 304.2 344.3
Company Outlook & Guidance: For upcoming months, the 2W domestic motorcycle industry is expected PER (x) 27.9 23.7 20.9
to grow at 8-10% YoY, post 11% growth in Q3FY24. Triumph capacity is expected to increase from the
current level of 10k to 20k and progressively to 30k by H1FY25. It will reach 100 cities by the end of EV/EBITDA (x) 23.5 19.2 16.5
Q4FY24 from the current 40 cities, covering ~50% market. RM inflation is building up in certain P/BV (x) 7.4 6.7 6.1
commodities (Copper, polypropylene, rubber, zinc) in Q4FY24 so far. We expect a CNG bike in FY25. ROE (%) 25.1 26.9 27.6
Current Valuation: 21x P/E on core Dec’25E EPS plus PMAG stake and cash reserves at 1x book
value (Earlier: 18x P/E on core Sep’25E EPS plus PMAG stake and cash reserves at 1x book value) Change in Estimates (%)
Current TP: Rs 7,050/share (Earlier TP: Rs 5,900/share) Y/E Mar FY24E FY25E FY26E
Sales 0.9% -0.7% 2.4%
Recommendation: Competitive position in the 125cc+ segment, expanding premium MC, E2W portfolio
and focus on E3Ws and gradual exports pick up provides operational levers to maintain margins. EBITDA 2.5% 0.7% 3.8%
However, the valuation appears stretched (stock is currently trading at 25x 12MF consensus P/E), and as PAT 2.3% 0.7% 3.5%
a result, we downgrade to HOLD from BUY.
Financial Performance: Bajaj reported a good set of results, largely in line with our estimates. Revenue ESG disclosure Score**
stood marginally below our estimate by 1.2% at Rs 12,114 Cr, up 30%/12.4% YoY/QoQ led by higher Environmental Disclosure 46
sales volume (up 22%/14% YoY/QoQ). ASP (1.5% miss) grew by 7% YoY, down 1.3% QoQ. YoY growth Social Disclosure Score 27
in the ASP was led by product premiumisation and ramp-up in EV sales. EBITDA grew by 37%/14%
Governance Disclosure 85
YoY/QoQ to Rs 2,430 Cr, a 2% beat vs our estimate led by better cost control and lower employee costs. Score
Total ESG Disclosure Score 53
EBITDA margins stood impressive at 20.1%, up ~100/27 bps YoY/QoQ vs our estimate at 19.4% led by
higher operating leverage absorbing the drag from competitive investments in the EV segment. PAT at Rs Sector Average 48.8
2,042 Cr, grew by 37%/11% YoY/QoQ in line with EBITDA growth. Source: Bloomberg, Scale: 0.1-100
**Note: This score measures the amount of ESG data a company reports
publicly and does not measure the company's performance on any data
Outlook: We model 13% CAGR volume growth over FY23-26E as we expect recovery in exports and point. All scores are based on 2022 disclosures, The Sector average is for
higher domestic sales. We maintain ~20% EBITDA margins for our forecast years. The key risk will be the NSE500 companies

failure of actual exports to pick up from H1FY25 onwards and the increase in RM costs. Relative performance
Valuation & Recommendation: We revise our EBITDA upwards for FY25/26 by ~1%/4% each as we
factor in improved margin performance of Q3FY24. We slightly increase our sales volume assumption for
FY26 by 3%. We value the stock at 21x (from 18x) its Dec’25E core EPS (Rollover from Sep’25E), add for
the company’s stake in PMAG and surplus cash reserves at 1x book value to arrive at our TP of Rs
7,050/share (from Rs 5,900/share earlier), implying 2% downside from the CMP. We downgrade our
rating to HOLD from BUY on the stock.

Key Financials (Standalone)

(Rs Cr) Q3FY24 QoQ (%) YoY (%) Axis Est. Variance Source: Ace Equity, Axis Securities
Net Sales 11,833 12.5% 30.8% 12,018 -1.5%
EBITDA 2,430 13.9% 36.8% 2,379 2.1% Aditya Welekar
EBITDA Margin 20.06% 27 98 19.43% 63 Sr. Research Analyst
Adj Net Profit 2,042 11.2% 36.9% 1,998 2.2% Email: aditya.welekar@axissecurities.in
Adj EPS (Rs) 72.2 11.2% 37.0% 70.6 2.2%
Sridhar Kallani
Source: Company, Axis Research Research Associate
Email: shridhar.kallani@axissecurities.in

1
Key Concall Highlights

 Exports Outlook: Management said that the export recovery will be gradual as the currency-led inflation
continued to dampen export recovery and exports are now at 70% of the peak of FY22. However, in Q3FY24, the
company delivered a 2% QoQ improvement in overall exports. Africa and South Asia are dragging the export
recovery as they are still at ~50% of their peak levels, while LATAM, the Philippines and the Middle East are now
performing above the peak levels that they achieved in FY22.

 Domestic motorcycles: The domestic motorcycle industry retail grew by 11% YoY in Q3FY24. Retails hold up
well in post festive month of Dec’23, and as a result company expects 8-11% industry growth in the coming
months. Bajaj’s motorcycle retail grew 2x the industry growth, led by the 125cc+ segment which grew by 36% vs
13% for the industry. The 125cc plus segment accounts for ~50% of the industry and ~70% of the total retails of
Bajaj. Bajaj’s market share in the 125cc+ segment now stood at 31% reaching near a market leadership position in
the segment.

 Chetak: Chetak is now present in 140 cities (from 120 cities in Q2FY24) with 160 (from 140) exclusive sales and
service stores, covering 80% of the high-speed EV market (improvement from 75% earlier). The company’s market
share has increased from 4% in FY23 to 14% in Dec’23 in retail terms. The company is targeting the 15k
sales/month mark in Q4FY24.

 Premium biking: Triumph received a good response, and the company delivered 2.8k units in Dec’23 in 40 cities.
The company will expand its footprint and expand to 100 cities by the end of Q4FY24. In key markets like
Bangalore and Kerala, Truimph has achieved a 20% market share. Currently, Triumph's production capacity
stands at 10k units, and it will be expanded gradually to 20k and to 30k units by H1FY25. The company has
commenced exports of Triumph and exported around 6,200 units in Q3FY24 (>3,500 units in December). The
company also received good responses to the recently launched Duke 390 and 250 in the KTM range. It has also
launched the new Husqvarna range in Jan’24.

 3W and E-3W: 3W overall market share stood solid at 77% in Q3FY24 and 80% in the passenger segment. In the
CNG-based segment, which now accounts for 60% of the industry, Bajaj’s market share stood almost at 85%.
Bajaj has expanded its E-3W footprint to 23 cities and volumes in Dec’23 stood at ~1,800 units. It has achieved
~50% market share in every city where it has launched the E-3W within the last three months. Going forward, E-
3Ws will be aggressively scaled up to about 50 cities in Q4FY24 and then to 200 cities by the end of CY24.

 Other key takeaways: In Q3FY24, Spares revenue stood at Rs 1,300Cr. Cash Surplus in Q3FY24 end was at Rs
18,439 Cr.

Key Risks to our Estimates and TP

 Exports picking up/declining at a faster pace than our forecast period.

 Drop/increase in Commodity prices from the current level, which would impact the company’s gross margins
positively/negatively.

 Risk of FAME subsidy cut which may hamper the off-take of vehicles in the domestic market leading to downside
risk to our TP.

Change in Estimates
Revised Old % Change
FY24E FY25E FY26E FY24E FY25E FY26E FY24E FY25E FY26E
Revenue 43,600 52,240 59,902 43,197 52,619 58,494 0.9% -0.7% 2.4%
EBITDA 8,593 10,462 12,038 8,382 10,385 11,600 2.5% 0.7% 3.8%
PAT 7,311 8,602 9,736 7,145 8,543 9,403 2.3% 0.7% 3.5%
EPS 258.5 304.2 344.3 252.6 302 332.4 2.3% 0.7% 3.6%
Sales Volume (Mn
4.28 5.01 5.63 4.21 5.01 5.46 1.6% 0.0% 3.1%
units)
EBITDA % 19.7% 20.0% 20.1% 19.40% 19.70% 19.80% 31 33 30
Source: Company, Axis Securities

2
Q3FY24 Results Review
Axis Sec
YE Mar (Rs Cr) Q3FY24 Var (%) Q2FY24 QoQ (%) Q3FY23 YoY (%) Consensus Vs cons
Estimates

Domestic
2W (Units) 6,55,453 6,55,453 0.0% 5,05,320 29.7% 4,55,146 44.0%
CV :3W + Quadricycle 1,22,828 1,22,828 0.0% 1,32,236 -7.1% 89,042 37.9%
Total Domestic 7,78,281 7,78,281 0.0% 6,37,556 22.1% 5,44,188 43.0%
Exports
2W (Units) 3,84,740 3,84,740 0.0% 3,76,263 2.3% 3,96,496 -3.0%
CV :3W + Quadricycle 37,976 37,976 0.0% 40,134 -5.4% 43,187 -12.1%
Total Exports 4,22,716 4,22,716 0.0% 4,16,397 1.5% 4,39,683 -3.9%
Total
2W (Units) 10,40,193 10,40,193 0.0% 8,81,583 18.0% 8,51,642 22.1%
CV :3W + Quadricycle 1,60,804 1,60,804 0.0% 1,72,370 -6.7% 1,32,229 21.6%
Total Volume (Domestic + Exports) (Units) 12,00,997 12,00,997 0.0% 10,53,953 14.0% 9,83,871 22.1%
Financials
Net Sales 11,833 12,018 -1.5% 10,519 12.5% 9,048 30.8% 11,767 1%
Other Operating Income 281 240 16.7% 258 8.6% 267 4.9%
Total Revenue 12,114 12,258 -1.2% 10,777 12.4% 9,315 30.0%
ASP (Rs/unit) 98,526 1,00,067 -1.5% 99,805 -1.3% 91,960 7.1%
Less:
Net Raw Material consumed 8,610 8,679 -0.8% 7,651 12.5% 6,578 30.9%
Other Manufacturing & Sales Exp. 690 797 -13.5% 612 12.7% 610 13.1%
Personnel Cost 385 404 -4.8% 382 0.8% 351 9.5%
Total Expenditure 9,684 9,879 -2.0% 8,644 12.0% 7,538 28.5%
EBIDTA 2,430 2,379 2.1% 2,133 13.9% 1,777 36.8% 2,285 6%
Less: Depreciation 88 83 6.0% 88 0.6% 74 19.2%
EBIT 2,342 2,296 2.0% 2,045 14.5% 1,703 37.5%
Less: Interest 12 10 21.6% 7 85.3% 8 42.7%
Add: Other income 346 343 0.9% 361 -4.2% 269 28.6%
Profit Before Extra-ordinary and Tax 2,676 2,629 1.8% 2,400 11.5% 1,964 36.3%
Less: Extraordinary Expense (net) 0 0 NA 0 NA 0 NA
Profit Before Tax 2,676 2,629 1.8% 2,400 11.5% 1,964 36.3%
Less: Total Tax 634 631 0.5% 564 12.4% 472 34.3%
Profit After Tax 2,042 1,998 2.2% 1,836 11.2% 1,491 36.9%
Adj. Profit After Tax 2,042 1,998 2.2% 1,836 11.2% 1,491 36.9% 1,931 6%
Diluted Shares Outstanding (Cr) 28 28 0.0% 28 0.0% 28 -0.1%
Reported EPS (Rs.) 72.2 70.6 2.2% 64.9 11.2% 52.7 37.0%
Adj. EPS (Rs.) 72.2 70.6 2.2% 64.9 11.2% 52.7 37.0% 68.0 6%

Change in Change in Change in

Margin Analysis Q3FY24 Q3FY24E Q2FY24 Q3FY23
bps bps bps

EBIDTA Margin 20.1% 19.4% 63 19.8% 27 19.1% 98

Adj. NPM 16.9% 16.3% 55 17.0% -18 16.0% 85
Effective Tax Rate 23.7% 24.0% -31 23.5% 19 24.0% -35
Cost Analysis
Gross Margin 28.9% 29.2% -27 29.0% -8 29.4% -46
Other Expenses./Net Sales 5.7% 6.5% -81 5.7% 2 6.5% -85
Personnel/Net Sales 3.2% 3.3% -10 3.5% -37 3.8% -59
Source: Company, Axis Securities, Bloomberg Consensus

3
Financials (Standalone)
Profit & Loss (Rs Cr)
Y/E March (Rs. Cr) FY23 FY24E FY25E FY26E
Net revenues 35,756 43,600 52,240 59,902
Operating expenses 29,734 35,006 41,777 47,864
EBIDTA 6,021 8,593 10,462 12,038
EBIDTA margin (%) 16.8 19.7 20.0 20.1
Other income 1,853 1,397 1,282 1,252
Interest 39 41 37 37
Depreciation 282 342 388 442
Profit Before Tax 7,409 9,607 11,319 12,810
Tax 1,781 2,296 2,716 3,074
Reported Net Profit 5,628 7,311 8,602 9,736
Net Margin (%) 15.7 16.8 16.5 16.3
Adjusted Net Profit 5,737 7,311 8,602 9,736
Source: Company, Axis Securities

Balance Sheet (Rs Cr)

Y/E March (Rs. Cr) FY23 FY24E FY25E FY26E

Equity capital 283.0 283.0 283.0 283.0

Reserves & surplus 25,143 27,440 30,114 33,262

Shareholders’ funds 25,426 27,723 30,397 33,545

Total Loans 124 124 124 124
Deferred tax liability 345 345 345 345
Total Liabilities and Equity 25,895 28,193 30,867 34,015
Gross block 5,435 6,447 7,417 8,367
Depreciation 2,769 3,111 3,499 3,941
Net block 2,666 3,335 3,917 4,425
Capital WIP 82 70 100 150
Investments 22,973 21,973 21,973 21,973
Inventory 1,398 1,705 1,633 1,871
Debtors 1,776 2,166 2,595 2,976
Cash & Bank Bal 286 1,786 2,667 5,090
Loans & Advances 1,947 3,202 3,373 3,679
Current Assets 5,406 8,858 10,268 13,616
Sundry Creditors 4,309 4,968 4,148 4,756
Other Current Liability 923 1,076 1,245 1,394
Current Liability& Provisions 5,232 6,044 5,392 6,150
Net current assets 174 2,814 4,876 7,466
Total Assets 25,895 28,193 30,867 34,015
Source: Company, Axis Securities

4
Cash Flow (Rs Cr)
Y/E March (Rs Cr) FY23 FY24E FY25E FY26E
EBIT 5,739 8,251 10,074 11,596
Other Income 1,853 1,397 1,282 1,252
Depreciation & Amortization 282 342 388 442
Interest paid(-) (39) (41) (37) (37)
Tax paid(-) (1,781) (2,296) (2,716) (3,074)
Extra Ord Income (144) - - -
Operating Cash Flow 5,910 7,654 8,990 10,178
Change in Working Capital 989 (1,140) (1,181) (167)
Cash flow from Operations 6,899 6,514 7,810 10,010
Capex (1,171) (1,000) (1,000) (1,000)
Strategic Investment (538) - - -
Non-Strategic Investment 1,435 1,000 - -
Cash flow from Investing (274) - (1,000) (1,000)
Change in borrowing 1 - - -
Other (2,878) (0) 0 -
Dividends paid(-) (4,051) (5,014) (5,928) (6,587)
Cash Flow from Financial Activities (6,927) (5,014) (5,928) (6,587)
Change in Cash (303) 1,500 882 2,423
Opening cash 588 286 1,786 2,667
Closing cash 286 1,786 2,667 5,090
Source: Company, Axis Securities

Ratio Analysis (%)

Y/E March FY23 FY24E FY25E FY26E
Revenue Growth 10.1 21.9 19.8 14.7
EBITDA Margin 16.8 19.7 20.0 20.1
Net Profit Margin 16.0 16.8 16.5 16.3
ROCE (%) 20.2 24.8 26.6 27.3
ROE (%) 20.4 25.1 26.9 27.6
EPS (Rs) 201.2 258.5 304.2 344.3
P/E (x) 19.3 27.9 23.7 20.9
P/ BV (x) 4.4 7.4 6.7 6.1
EV/ EBITDA (x) 18.4 23.5 19.2 16.5
Fixed Assets Turnover Ratio (x) 12.9 12.5 12.7 12.8
Debt / Equity (x) 0.0 0.0 0.0 0.0
EV/ Sales (x) 3.1 4.6 3.9 3.3
Source: Company, Axis Securities

5
 Bajaj Auto Price Chart and Recommendation History

(Rs)

Source: Axis Securities

Date Reco TP Research

03-Jan-22 BUY 4,500 Top Picks
20-Jan-22 BUY 4,200 Result Update
03-Feb-22 BUY 4,250 Top Picks
02-Mar-22 BUY 4,250 Top Picks
04-Apr-22 BUY 4,250 Top Picks
29-Apr-22 BUY 4,350 Result Update
01-Jun-22 BUY 4,350 Top Picks
01-Jul-22 BUY 4,200 Top Picks
28-Jul-22 HOLD 4,130 Result Update
14-Oct-22 BUY 4,000 Result Update
27-Jan-23 BUY 4,170 Result Update
26-Apr-23 BUY 4,785 Result Update
26-Jul-23 BUY 5,380 Result Update
28-Aug-23 BUY 5,400 AAA
19-Oct-23 BUY 5,900 Result Update
25-Jan-24 HOLD 7,050 Result Update

Source: Axis Securities

6
About the Analyst

Analyst: Aditya Welekar

Email: aditya.welekar@axissecurities.in

Sector: Automobiles

Analyst Bio: Aditya Welekar is a PGDBM in Finance with 12 years of experience in Equity
Market/Research.

About the Analyst

Analyst: Shridhar Kallani

Email: shridhar.kallani@axissecurities.in

Sector: Automobiles

Analyst Bio: Shridhar Kallani is a Chartered Accountant and a graduate from St.Xaviers College
Kolkata.

Disclosures:

The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
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7
 DEFINITION OF RATINGS

Ratings Expected absolute returns over 12-18 months

BUY More than 10%

HOLD Between 10% and -10%

SELL Less than -10%

NOT RATED We have forward looking estimates for the stock, but we refrain from assigning valuation and recommendation

UNDER REVIEW We will revisit our recommendation, valuation and estimates on the stock following recent events

NO STANCE We do not have any forward-looking estimates, valuation or recommendation for the stock

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distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such
distribution, publication, availability or use would be contrary to law, regulation or which would subject ASL to any registration or licensing requirement within
such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors.

The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as
endorsement of the views expressed in the report. The Company reserves the right to make modifications and alternations to this document as may be
required from time to time without any prior notice. The views expressed are those of the analyst(s) and the Company may or may not subscribe to all the
views expressed therein.
Copyright in this document vests with Axis Securities Limited.
Axis Securities Limited, SEBI Single Reg. No.- NSE, BSE & MSEI – INZ000161633, ARN No. 64610, CDSL-IN-DP-CDSL-693-2013, SEBI-Research Analyst
Reg. No. INH 000000297, SEBI Portfolio Manager Reg. No.- INP000000654, Main/Dealing off.- Axis Securities Ltd, Unit No.1001, 10th Floor, Level-6, Q2
Building, Aurum, Q Parc, Plot No. 4/1, TTC, Thane – Belapur Road, Ghansoli, Navi Mumbai. – 400 710., Regd. off.- Axis House,8th Floor, Wadia
International Centre, PandurangBudhkar Marg, Worli, Mumbai – 400 025. Compliance Officer: Jatin Sanghani, Email: compliance.officer@axisdirect.in, Tel
No: 022-49212706
Digitally signed by
NEERAJ NEERAJ CHADAWAR

CHADAWAR Date: 2024.01.25

09:15:54 +05'30'