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Bajaj Auto (BJAUT) has reported stronger-than-expected Q4FY23 earnings, bothat revenue and profitability levels, resulting in 9% beat on consensus EBITDA.Revenue was up 12% YoY at Rs89bn, driven mainly by mix improvement andpricing, resulting in ~27% jump in ASP YoY as against 12% decline in volume. Miximprovement was driven by lower sales of export 2Ws with corresponding  increase in domestic sports bike mix and domestic 3W sales mix. Exports retails have started to improve from February lows and are improving since then, implying better export volume in Q1FY24 and potential reversal in product mix. Models co-developed with Triumph would witness global launch in June end and
subsequently get retailed in India from H2CY23. We are increasing our FY24/25 EBITDA estimates by ~4% mainly driven by an increase in ASP estimates and a slight increase in EBITDAM by ~20-30bps. We retain ADD on BJAUT with a revised DCF-based target price of Rs4,563 (earlier Rs4,051), implying ~14.5x FY25E core earnings. Increase in target price is driven by a combination of increase in earnings estimates and rollover of earnings by a quarter in DCF.

Key takeaways from earnings call

* Exports retails outpaced retails for the past 15 months and stock levels have reduced to sub-optimal levels and dealers are not willing to stock up amidst dollar availability issues and uncertainty on demand in key markets. In this situation, with February
retails being the lowest in recent times for BJAUT export markets in totality, March retails were better than February numbers and April seems to be better than March. Thus, with retails improving and stocks being subdued, BJAUT is looking forward to
improving exports, following better retails over the next few months and will subsequently enhance exports and add to dealer stocks with improving visibility of currency availability in key export markets. Market share in all key export markets for
BJAUT remains unchanged in this export slowdown and models like Dominar is witnessing 90 days waiting period in LAT-Am markets.

* Domestic 2W retails grew ~16% in FY23 and the improving demand momentum is set to continue, especially led by 125cc and above segments. Pulsar, as a brand, is ready to take care of demand across categories from 125/135cc models to 150/160cc models to 200/250cc models. Platina 110ABS is taking care of the entry- level segment offering from Bajaj. Model co-developed with Triumph would be globally launched in June end in London and it would be retailed in India by BJAUT
and by Triumph globally.

* The company is not perturbed about the potential FAME subsidy withdrawal going ahead for e2Ws and is confident of reducing the cost of Chetak in coming months along with expanding monthly retails to 10k unit levels from current 6k units and
reaching out to 120 towns by mid-FY24. For e3Ws in domestic market, testing is still going on and BJAUT would do a select city limited launch in mid-FY24 and subsequently look to expand in other cities based on the initial launch feedback.

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