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* Q1FY23 EBITDA increased by 10% qoq (3-year CAGR at 11%) to Rs8.3bn, at 8% above estimates due to better gross margin. Revenue increased by 6% qoq (3-year CAGR at 13%) to Rs34bn, in line with estimates. Management does not expect any supply-side bottlenecks ahead.

* Volume growth is expected to be robust at 34% in FY23, led by new products and strong exports. Recently-launched Hunter 350cc is seeing positive response, and the upcoming product pipeline includes the new-gen Bullet 350cc model and new 650cc models.

* We build-in revenue CAGR of 26% over FY22-24E. EBITDA margin is likely to expand, from 21.1% in FY22 to 25.6% in FY24E. Free cash-flow generation should be healthy at an average of Rs25bnpa over the next two years.

* We retain BUY, with our SOTP based TP of Rs3,450 (Rs3,340 earlier), based on 25x P/E of the motorcycle business and 20x P/E of the CV business, on Sep’24E EPS (Jun’24E earlier

* What we like: 1) The product pipeline remains strong, and several products are expected to be launched, going ahead; 2) Positive response is being witnessed for Hunter 350cc, and initial bookings indicate that it is attracting non-cruiser buyers; 3) Supply-chain bottlenecks and commodity inflation headwinds are not likely to be seen ahead; 4) Network has widened to 2,132 domestic outlets and +860 global outlets

* What we do not like: Hunter 350 has been priced competitively which could impact blended realizations and margins

* Q1 EBITDA above estimates: Revenue increased by 6% qoq (3-year CAGR at 13%) to Rs34bn, in line with estimates. Volume grew by 3% and realization increased by 2%. Management does not expect any supply-side bottlenecks ahead. EBITDA increased by 10% (3-year CAGR at 11%) to Rs8.3bn, at 8% above estimates, due to better gross margin. Commodity inflation headwinds are not expected to continue ahead. Other income declined by 59% to Rs487mn due to mark-to-market losses. Share of profit from associate company (VECV) was lower by 37% to Rs338mn. Accordingly, adjusted PAT was flat at Rs6.1bn, marginally above estimates.

* Maintain BUY: We retain BUY with a Sep’23E TP of Rs3,450 (Rs3,340 earlier). Key downside risks: lower-than-expected demand in key geographies; increase in competitive intensity; failure of new products; adverse commodity prices/currency rates.

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