Broker’s call: Bajaj Auto (Buy)

Target: INR 4,600

CMP: INR 4,294.75

In the fourth quarter of fiscal 2013, Bajaj Auto’s EBITDA margin was 19.3 percent (+220 bps yoy, +20 bps qoq), 40 bps higher than JMF’s led by a favorable mix. Domestic 2W demand is led by the premium segment (125 cc+) and the company expects the industry to grow between 6 and 8% over FY24.

The first product introduction with Triumph is expected during 1QFY24, followed by the commencement of deliveries in the following quarters. In the e-2W segment, the company is gradually increasing production and plans a monthly run rate of 10,000 units in the near term. Domestic 3W volume prospects remain strong led by higher CNG demand.

The first e-3W is expected to be launched soon as the company awaits FAME certification. We expect steady domestic demand (led by premium sectors) to offset the overall headwinds in export markets which may persist in the near term.

Margins in the medium term are likely to be supported by (a) favorable mix and (b) better export realization. Given the successful track record of Bajaj Auto’s involvement in product in the past few years, we remain positive about the stock.

We estimate revenue / EPS CAGR of 14% / 17% over fiscal year ’23-25. Keep buying with Mar’24 TP valued at INR 4,600 (17x PE).

Delays in launching new products and continued weakness in export markets are major risks.