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Triumph Street launched at aggressive pricing

5k/month capacity, but scalable I More products to follow

* BJAUT and Triumph revealed the prices of their co-developed product Speed 400 at INR223k for the first 10k customers. After this initial period, the prices will be set at INR233k. Speed 400 would be available from the second half of Jul’23. Additionally, Scrambler 400, with its pricing yet to be revealed, is scheduled to be launched in Oct’23. These motorcycles would be sold through Triumph’s own dealership network, which the company plans to expand to 80 cities by Mar’24 (from 16 currently).

Features, capacity details, and export market strategy

* Speed 400 will be powered by 398cc single cylinder engine. It comes with a wet multi-plate clutch, which has a high torque transmission facility. The engine is paired with a 6-speed transmission and agile dynamics, making it suitable for both beginners and experienced riders.

* The Speed 400 addresses the short service interval issue for premium motorcycles. It comes with a 16k-km or 12 months (whichever comes earlier) service interval and two-year unlimited warranty.

* Both the bikes would be manufactured at BJAUT’s Chakan 2 plant in India. Brazil and Thailand would assemble CKD units from India. Chakan 2 has an installed capacity of 25k units/month (Triumph-5k units and KTM-20k units). It would take 3-4 months to ramp up and if there is a strong demand, the capacity can be expanded to 40k units/month initially and then double from there onwards.

* Export orders, which is a new area for Triumph, would commence from 3QFY24 and would be exported to the UK, South America, Japan, and South east Asia.

Competition

* The average industry size of domestic >350CC category was 65.5k units/month as of FY23. This implied a ~5% share of the overall domestic 2W industry. Within this, RE commanded ~93% share, followed by HMSI (~4%) and BJAUT (2%).

* Triumph twins would rival the likes of RE Classic 350 (sales of 26.2k units per month), Hunter 350 (sales of 15.9k units per month) and newly launched HD X440. The range topping HD X440 S is priced at a 21% premium to Speed 400, while RE Classic 350 Chrome variant is priced at par.

View on the product

* The starting price of INR223k for Speed 400 is considered quite competitive, when compared to its peers. Additionally, there are plans to introduce more products, with a new product launch scheduled every year. While awaiting real-world feedback, we believe that these new products will create significant competition for RE, which currently holds a monopolist position in the >250cc segment.

Valuation and view: Both domestic and export volumes are expected to recover in FY24 from the low base, driving healthy earnings recovery. We expect BJAUT to benefit from market share gains over the long term, led by: 1) the premiumization trend, 2) the opportunity in exports, and 3) the potential sizeable position in the Scooter market via EVs. However, a large part of its India profit pool (of premium motorcycle and 3Ws) is vulnerable to possible disruption from electrification. At 18.3x/16.5x FY24E/FY25E consolidated EPS, the stock’s valuation fairly reflects the expected recovery as well as the risk of EVs. BJAUT’s dividend yield of 4.5-5.0% should support the stock. We reiterate our Neutral rating with a TP of INR4,905 (based on 16x Jun’25E Consolidated EPS).

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