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Margins maintained despite lower sequential volumes

Domestic 2W (industry) volumes to grow 7-8% YoY in FY25E

* BJAUT reported healthy 4QFY24 performance as EBITDA/PAT came in higher at INR23.1b/INR19.4b (vs. est. of INR21.6b/INR18.2b) driven by a better ASP at INR107.5k/unit (vs. est. of INR102.6k/unit). While BJAUT is likely to outperform the domestic motorcycles segment led by its healthy launch pipeline, the export outlook remains uncertain given the geopolitical headwinds in key markets.

* We maintain our FY25/FY26 estimates. BJAUT has witnessed the most rerating in the last 12 months, aided by a better-than-expected performance and a one-of-a-kind policy to reward its shareholders. After the sharp rally, however, the stock at ~28x/24x FY25E/26E EPS appears fairly valued. We reiterate our Neutral rating with a TP of INR8,360 (premised on 22x FY26E consol. EPS).

EBITDA margin stable sequentially despite lower volume 

* BJAUT’s 4QFY24 revenue/EBITDA/PAT grew 29%/34%/35% YoY to INR114.9b/INR23.1b/INR19.4b (vs. est. of INR109.6b/INR21.6b/ INR18.2b). Its revenue/EBITDA/PAT increased ~23%/35%/33% YoY to INR446.9b/INR88.2b/INR74.8b in FY24.

* Volume grew 24% YoY in 4QFY24. This, combined with favorable FX and a better mix, resulted in ~4% YoY improvement in net realizations to INR107.5k/unit (vs. est. of INR102.6k/unit) during the quarter. ? Spares revenue grew ~13% YoY to INR13b, while export revenue jumped ~28% YoY to INR38.5b in 4QFY24.

* Gross margin contracted 50bp YoY (-80bp QoQ) to 29.7% (vs. est. of 29.1%). EBITDA margin improved 80bp YoY to 20.1% (vs. est. of 19.7%).

* The share of profit from associates declined 75% YoY to INR839m (or ~4% contribution to standalone PAT) during 2HFY24.

* Payout for FY24: Management announced a dividend of INR80/share (or INR22.3b). This, along with the earlier completed buyback of INR49.3b, adds up to >95% of PAT. BJAUT has a net cash of INR163.9b as of Mar’24, despite investments of INR8b and payments of INR89b to shareholders in terms of dividends and share buybacks.

Highlights from the management commentary

* Domestic 2Ws: Management expects industry volumes to grow by 7-8% in FY25E with the premium segment growing faster than the industry.

* Exports: Export markets are recovering gradually but still are 25% below the FY22 peak. Currency situation in the emerging market continues to remain fragile.

* Chetak: It has received PLI certificate for both the models of Chetak. Despite the PLI benefit, Chetak would not be profitable at the unit level, and efforts are underway to reduce costs by way of localization.

* Quadricycle launch: Egypt’s government has given approval for quadricycles, which would be replacing 3Ws that are currently banned. BJAUT’s monthly export run rate was ~6k units (and ~9k units during peak) for its 3Ws, and it currently has ~550k 3Ws plying in Egypt.

Valuation and view

* We retain our FY25/FY26 estimates. We expect BJAUT to gain share in domestic motorcycles in FY25, aided by: 1) a shift in demand to the 125cc+ segment, which is its strong market; and 2) a healthy launch pipeline. However, export demand continues to remain uncertain due to geopolitical headwinds. Even 3W ICE demand is likely to normalize over a very high base in the last two years.

* BJAUT has witnessed the most re-rating in the last 12 months on the back of its market share gains in the 125cc+ domestic motorcycles segment, improved margins, and a one-of-a-kind policy to reward its shareholders. After the sharp rally, however, the stock at ~28x/24x FY25E/26E EPS appears fairly valued. We reiterate our Neutral rating with a TP of INR8,360 (premised on 22x FY26E consol EPS).

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