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Strong volume growth and favourable commodity prices led to robust performance

Robust overall performance: Bajaj Auto’s Q3FY24 operational revenue came in at Rs 12,114 Cr, increasing by 30% YoY/12.4% QoQ, driven by healthy volumes across segments in domestic market while exports volume remained stable on sequential basis. Consequently, the blended realizations were up by 6.5% YoY to Rs 100,347/units aided by premiumization of portfolio towards 125+cc motorcycles which stood at ~67% of overall volumes. Strong overall performance led to PAT expansion of 36.9% YoY/11.2% QoQ to Rs 2,042 Cr.

Strong volume leads to higher operating leverage: Gross profit came in at Rs 3,504 Cr, up by 28% YoY/12.1% QoQ benefitting from stable commodity prices. The superior product mix was partly offset by presence of EV in its overall volume which had a slight impact on gross margin as it contracted by 46bps YoY/8bps QoQ to 28.9%. EBITDA increased by 36.8% YoY/13.9% QoQ to Rs 2,430 Cr while margin expanded by 99bps YoY/27bps QoQ to 20.1%, aided by effective cost controlling measures.

Resilient 3-Wheeler business: The 3-wheeler business continues to be quite resilient for the company as it delivered a volume growth of 21.6% YoY to 1.6 Lakh Units, mainly led by domestic business as it was up by 37.9% YoY with rising penetration of CNG pumps driving the growth. International volume continued to remain under pressure as it was down by 12.1% YoY to 37,976 units. Its E-3 Wheeler volume for the quarter was ~18,000 units with presence in ~23 cities, going ahead the management plans to increase its presence to ~50 cities in Q4FY24 and ~200 cities by Q1FY25 which shall aid in volume as well as revenue expansion.

Healthy offtake in Bajaj-Triumph business: The company delivered ~15,000 units during the quarter with ~8,000 units in the domestic market and the remaining ~7,000 units in the international market. It aims to increase its presence across Indian as well as international markets with an aim to deliver ~20,000 units in Q4FY24 and increase gradually.

Outlook & Valuations: Bajaj Auto continues to deliver strong performance which is mainly led by healthy demand in the domestic market across segments. The recovery in the international market as well as sustained demand momentum and new launches across its portfolio will continue to drive the volume while premiumization towards 125+cc motorcycles would transcribe in healthy revenue expansion. Additionally, the increased penetration of CNG pumps as well as improved mobility would also drive the overall 3-wheeler sales. Factoring this, we estimate its revenue/EBITDA/PAT to grow at 17.4%/22.4%/23.7% CAGR over FY23-25E. We have assigned a PE of 22x on FY26E EPS and recommend a Buy rating with a revised target price upwards to Rs. 8,398.

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