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Bajaj Auto Limited (BAL) reported healthy margin performance in Q1 FY24 despite exports markets not yet out of the woods. Topline growth was up 16% qoq and 29.3% up yoy as volumes in the domestic markets were quite strong at 73% yoy on low base of last year and demand uptick seen in 2W industry lately. The total volumes in the quarter were up 10% yoy and 20% qoq, while the realizations grew by 17% yoy and dropped by 3% qoq. The sequential drop was on account of negative product mix tilted towards commuter motor cycles, Chetak and 3W EVs. During the quarter, domestic motorcycles grew by 73% yoy and 31% qoq. The strong yoy surge was due to strong launches in the >125 ccc segment as well as the premium segments in the domestic markets. The rate of decline in the exports motorcycles has reduced at 35% from 40% seen last quarter as we are seeing recovery in Africa. Motorcycle exports grew by 12% qoq, while 3W exports grew by 15% qoq. EBITDA was up by 51% yoy to ?19.5bn, while margins moved up by 280 bps yoy to 19%, down 30 bps qoq. Margins were up mainly on better realizations and stable commodity costs. All other cost items below operating levels remaining more or less range bound, bottomline was 42% up yoy and 16% qoq at ?16.6bn. Tax rate was steady at 24.5% qoq.

Domestic volumes zoom, exports outlook is cautiously optimistic

Domestic motorcycle volumes witnessed a rise of 73% yoy, and 31% qoq. The company started gaining the lost market share especially in the sports and executive segment of >125 cc since H2 of last fiscal. In the executive business, the success of Pulsar 125 NS and CT 125, and Pulsar N series in sport segment led to a good market share win. The company has 20 models now in the >125cc segment and contributes 70% (60% at the end of FY23) of BAL’s domestic 2W portfolio. Management expects the domestic 2W industry to grow at 4-6% in the coming few months. We believe BAL to grow at a higher pace than the industry and win market share.

Steady progress has being made on building EV portfolio as Chetak scooter sales jumped 2x qoq and 3x yoy and is spreading its network of dealers over 120 cities in the country with 140 stores. BAL has planned a capacity of 0.5 mn EV scooters (Chetak) viewing its heartwarming response at their Chakan plant. Along with this, the facility will be also used to produce the Triumph motorcycles.

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