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* In Q2FY25, 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 21.8% to Rs.131bn (vs est of Rs.134bn) backed by 16.2% growth in volume and 4.8% increase in ASP on YoY basis. Operating leverage and PLI incentive helps to sustain the margin above 20%, margin expanded by 41bps on YoY basis to 20.2% (est of 20.5%). EBIDTA grew by 24.3% to Rs.26.5bn ( est Rs27.4bn). PAT for the quarter jumped by 9.2% YoY at Rs 20.1bn (vs est. Rs. 22.4bn). PAT lower than estimations due to higher tax on account of one-time deferred tax provision.

* The company is experiencing strong growth in green fuel 2W and 3W, exports particularly from the LATAM region, with a 20% growth rate. Its export strategy includes launching new models in expanding markets and strengthening its distribution network. Brazil's demand remains stable, with plant capacity set to scale to 35,000 units per month by January. Management anticipates exports in Q3 FY25 will surpass Q2 levels, with a projected 10% QoQ growth from the LATAM region, although currency challenges remain a key factor.

* Management is observing strong demand for the CNG+Petrol hybrid 125cc bike “Freedom” and anticipates further growth for both the electric vehicle (EV) and CNG models “Chetak” and “Freedom.” This shift is attributed to key economic factors, including Total Cost of Ownership (TCO), resale value, and driving range. Additionally, the network of CNG stations is expected to expand, supporting this transition. New model launches under the Chetak EV umbrella and expansion of network from the current 250+ exclusive stores and 3000+ Bajaj motorcycle stores along with new launches in the E-3W to drive growth for the EV portfolio. For Q2FY25 Chetak achieved market share of 19% compared to 10% for the previous year. Triumph’s partnership with Bajaj has seen success with new launches, including the Speed 400, which drove domestic sales up 50% quarter-on-quarter to nearly 10,000 units. Triumph’s success along with strong sales of Pulsar portfolio helped the company achieve strong growth in the 125cc+ segment.

* View & Valuation: We remain optimistic about Bajaj Auto’s growth trajectory in the medium to long term, supported by several key factors: 1) a growing focus on exports to drive sales; 2) increasing demand for the 125cc 2W “Freedom”; 3) strong demand for the 2W EV “Chetak”; and 4) an aggressive marketing push for CNG-based 2-wheelers and electric variants. 5) With the rising contribution of premium products like Triumph, solid growth in the EV portfolio (2W+3W), and improving profitability from “Chetak,” we maintain our BUY rating on the stock. We value the stock using an SOTP-based methodology, arriving at a target price of Rs. 12,483 (30x Sep-FY27E core EPS + KTM stake + cash).

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