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In 4QFY23, Bajaj Auto EBITDA margin stood at 19.3% (+220bps YoY, +20bps QoQ), 40bps higher than JMFe led by favorable mix. Domestic 2W demand is being led by premium segment (125cc+) and the company expects c.6-8% industry growth during FY24. Introduction of first product with Triumph is expected during 1QFY24, followed by start of deliveries in the subsequent quarters. In e-2W segment, the company is gradually ramping up production and plans monthly run-rate of c.10k units in the near-term. Outlook for domestic 3W volume remains strong led by higher CNG demand. Launch of its first e-3W is expected shortly as the company is awaiting FAME certification. We expect steady domestic demand (led by premium segments) to offset macro headwinds in export markets which may continue in the near-term. Margins in the medium-term are likely to draw support from a) favorable mix and b) better export realization. Given the successful track record of product intervention by BJAUT in the last few years, we remain positive on the stock. We estimate revenue / EPS CAGR of c.14%/c.17% over FY23-25E. Maintain BUY with Mar’24 TP of INR 4,600 (17x PE). Delay in new product launches and continued weakness in export markets are the key risks.

* Margin beats estimate: In 4QFY23, BJAUT reported adjusted net sales of INR 89bn (+12% YoY, -5%QoQ), c.7% above JMFe largely led by favourable mix. Double-digit growth in domestic revenue was partially offset by decline in exports. Realisation increased 27% YoY (+10% QoQ). EBITDA margin stood at 19.3% (+220bps YoY, +20bps QoQ), c.40bps higher than JMFe. Sequential improvement in margin (40bps) was led by a) favourable mix and b) judicious pricing. EBITDA stood at INR 17.2bn (+26% YoY, -3% QoQ). Adj. PAT for 4QFY23 stood at INR 14.3bn (+24% YoY, -4%QoQ), 7% above JMFe.

* Domestic market & outlook: The company indicated that domestic 2W industry has been witnessing healthy growth over the past 2 quarters led by premium segments (125cc+). Overall the management expects industry to grow at c.6 to 8% during FY24. During 4Q, BJAUT’s domestic 2W volume was led by premium products (125cc+). The strategy of upgrading customers to 125cc segment is working well and the company’s market share in 125-150cc segment has bounced back to c.50% led by new launches. Jointly developed product with Triumph will be unveiled in Jun’23 followed by start of deliveries during 2QFY24. The company indicated of strong product launch pipeline going forward (incl. EVs). Domestic 3W volumes have recovered back to pre-Covid levels for BJAUT. BJAUT’s market share in 3Ws currently stands at c.78% driven by rise in CNG penetration and support from retail financing.

* Export market & outlook: Export business continued to witness macro headwinds during 4Q. Volumes fell double-digit in key international markets owing to 1) limited availability of USD and 2) Demonetization in its key export geography - Nigeria. While the dealer inventory has normalised in most key markets, the company is unable to dispatch stock owing to limited availability of forex. The company indicated that export volumes have troughed as the retail demand has started to gradually recover since Mar’23. Overall, the management expects export volumes to gradually recover once USD availability improves

* Margin outlook: c.20bps QoQ EBITDA margin expansion during 4Q was led by favourable

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