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* In Q1FY25, Bajaj Auto delivered a well balanced performance supported by healthy volume growth, dollar realization and superior product mix in domestic market. Revenue during the quarter was up by 15.7% to Rs.119bn (vs est of Rs.120bn) backed by 7.4% growth in volume and 7.9% increase in ASP on YoY basis. Dollar realization and PLI incentive helps to sustain the margin above 20% which is better than our and street expectation, margin expanded by 130bps on YoY basis to 20.2% (est of 19.6%). EBIDTA grew by 23.6% to Rs.24.15bn ( est Rs23.68bn). EBIDTA/Vehicle continues to improve to Rs. 21,916/vehicle by 15.1% YoY attributed to better domestic sales mix. PAT for the quarter jumped by 19.4% YoY to Rs. 19.9bn vs est of Rs.19.9bn.

* For export strategy company categorizes its key export markets in three broad categories to improve the export like focusing more on stress market, launching new models in growing markets and expanding network. Brazil expansion as per plan, initial capacity of the plant will be 20000 units/month capacity which is scalable to increase to 50000 units/month. Management expect export in Q2 to be better than Q1. However, dollar availability is still a major concern in key export market.

* With the introduction of this CNG+Petrol hybrid two-wheeler (Freedom), we anticipate a substantial impact on the electric vehicle (EV) transition. This shift is driven by several economic factors such as Total Cost of Ownership (TCO), resale value, and driving range. Additionally, the current and expanding network of CNG stations is expected to accelerate the penetration of CNG two-wheelers over electric two-wheelers. We expect this will also help to bring back commuter segment customer. Given the increasing fuel prices and vehicle prices (post BS-VI and Covid) which impacted the TCO of entry level bikes, the segment has not done well as compared to industry growth post Covid. With the launch of CNG based fuel vehicle we expect Bajaj to up lift the entry level in medium term. Further increasing CNG station will also help adoption of CNG based 2W for mass transportation. We believe this will help Bajaj to further improve its market share in 2W segment. The 110- 125CC segment, being the second largest category, accounted for approximately 15% of the overall volume pre-Covid and has increased to around 28% post-Covid where Bajaj Auto holds a notable market share of about 29% in the segment as of FY24. Company is targeting a potential market size of 400-500 thousand/ month with starting capacity of 10k units/month scalable to 40k units/month.

* View & Valuation: We remain positive on the growth story of Bajaj auto supported by 1) increasing emphasis on export market to improve sales; 2) increasing mix of 125+ CC portfolio; 3) successful launch of Triumph in new product category; and 4) aggressive launch plan in CNG based 2W, and electric variant (under affordable category). Given the increasing share of premium product portfolio like Triumph, healthy growth in EV portfolio (2W+3W) and improving profitability of chetak, we continue to maintain our BUY rating on the stock. We value the stock using SOTP-based methodology with a TP of Rs. 10,321 (27x FY26E core EPS + KTM stake + Cash).

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