IGI Logo

Volume drivers remain intact, margins remain superior

Bajaj Auto Limited (Bajaj) reported Q2 FY25 topline growth of 20.6% yoy and 10% qoq as volumes in the domestic markets were up by 22% yoy on demand uptick seen in both 3W and 2W industry. During the quarter, domestic motorcycles grew by 26% yoy. The growth was due to success of >125 cc bikes, Triumph expansion, EV 3W and Chetak success. Exports grew steadily by 7% as well on a yoy basis as LATAM grew well and Africa showed slow recovery. Motorcycle exports grew by 5% yoy, while 3W exports grew by 21% yoy. Triumph and Chetak also pulled up a good show in Q2 as Chetak gained market share. EBITDA was up by 24.3% yoy to ?26.5 bn, while margins moved up to 20.2% bps yoy from 19.8%, and flattish qoq. Margins were up mainly on better cost management, operating leverage, improved product mix, favorable forex and stable commodity costs. All other cost items below operating levels remained more or less range bound, however, bottomline adjusted for an exceptional item of ?2.11 bn to account for a cumulative one-time impact o

Festive season starts on weak note, bounce back expected, executive portfolio remain buoyant

Company indicated that domestic 2W industry growth is being led by premium segments (125cc+). Bajaj has maintained strong position in 125+cc motorcycles (market share stands at 25%) and share of 125cc+ motorcycles increased to ~75% of its domestic sales (~60% during FY23). On the festive season, the company indicated that so far the demand has been flattish (below expectation of 5-6% growth). But the management is hopeful of demand bouncing back in the latter part of the festive season. Overall, the company expects domestic 2W industry to grow by between 5-8% in FY25 led by premium (125cc+) segment. In case of domestic 3Ws, growth going forward will be driven by E3Ws (new products + geography), expansion in CNG network and healthy retail finance penetration.

Export markets recovery led by LATAM, Africa improving gradually

Demand in the international market continued to improve. While LATAM is leading with 20%+ yoy growth, Asia is flattish and Africa continues to decline though at a lower rate (-9%). Demand in Nigeria is also gradually recovering (25k/15k vol. in 2Q/1Q against 5K yoy). New plant in Brazil which commenced production in Jun’24 has stabilised and operating at optimal utilisation level. Bajaj has approved further investment in this plant to expand its capacity to 35k units p.a for FY26. Colombia, Mexico and Peru are also driving the LATAM sales. Overall, the company indicated of continued growth momentum in exports business.

Please refer disclaimer at www.lkpsec.com/#foo

SEBI Registration number is INM000002483