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Superior product mix support revenue growth: Bajaj Auto’s Q4FY23 operational revenue came in at Rs 8,905 Cr registering a growth of 11.7% YoY, while on full year basis it grew by 9.9% to report record revenue at Rs 36,428 Cr. The growth was led by the domestic motorcycles especially the Pulsar portfolio, 125+cc category and sports bike category while higher commercial vehicle sales also supported the growth. Consequently, BAL’s average realization came in at Rs 1,04,143/unit which grew by 27.5% YoY driven by new launches and higher priced category of products.

Export volumes progressively decline: The exports progressively declined by 41.3% YoY due to the Macro economic conditions in key African markets. However, the company maintained it’s pricing in these markets and successfully passed on the pricing to customers and thereby maintaining its margins while it also kept its market share intact despite the low volumes. On the flipside, the buoyancy in the domestic market supported the export pressure as the overall domestic volumes including 2 and 3 wheelers grew by 31.1% YoY.

Strong recovery in 3-Wheeler portfolio: BAL continues to lead the 3-Wheeler segment as sales for the quarter reached to ~1 lakh units indicating strong rebound to the pre-pandemic levels. Consequently, in Q4FY23 the company reached an all-time high of ~78% in terms of market share. Going ahead, we expect its 3-wheeler portfolio to remain resilient which will support the impact of international volumes

Strategic pricing and commodity tailwinds improved the margin: The company reported its Q4FY23 EBITDA at Rs 1,717 Cr which grew by 25.7% YoY while Its EBITDA/unit came in at Rs 20,076 registering a growth of 43.6% YoY. Its EBITDA margin stood at 19.3%, an improvement of 215bps YoY. Higher sales of premium range of products and higher ASP supported the improvement while declining raw material compared to last period also aided expansion

Fruition of Bajaj-Triumph partnership: Starting from Q1FY24, Bajaj Auto will take over Triumph Motorcycle’s Indian business operations and manage its 15 showrooms in India. Additionally, the management has indicated the first set of Bajaj-Triumph manufactured motorcycles to be launched globally and in India by the end of Q1FY24 preferably June 27, 2023. With this Bajaj will have 5 dealership network under its arm – Bajaj Motorcycles, KTM, Chetak Electric, Bajaj 3-Wheeler and Bajaj-Triumph.

Outlook & Valuations: BAL is amongst the leading players and a top exporter of 2/3 wheelers in the country. Going ahead, the growth in the 2 wheeler industry will be driven by premiumization efforts in 125cc+ category in which BAL has a strong foothold with differentiated products on offer from entry range to premium sports bike. Additionally, its collaboration with Triumph could unlock further growth levers in premium variant of bikes while volumes recovery from the international market is also expected to drive growth for the company. We remain positive on the company's growth prospect and estimate its Revenue/EBITDA/PAT to grow at 18.2%/17%/15.9% CAGR over FY23-25E. We have assigned a PE of 18x on FY25E EPS and revised our rating from buy to accumulate with a target price of Rs. 4,807

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