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In line 3Q; demand recovers across segments

Domestic 2W industry volumes to grow 8-10% YoY in coming months

BJAUT reported an in-line performance in 3QFY24. The company reported its highest ever EBITDA margin of 20.1%, up 100bp YoY, supported by healthy volume growth in the domestic market, better realizations, and cost control.

We maintain our FY24/FY25 estimates. We now value BJAUT at ~20x Dec’25E EPS (vs. 18x Dec’25E EPS earlier) to factor in a healthy recovery in domestic 2W volumes, a gradual pickup in exports, and its growth in the growing e2W market through products and channel expansion. Reiterate Neutral rating with a TP of INR6,775.

EBITDA margin expansion continues

BJAUT’s 3QFY24 revenue/EBITDA/PAT grew 30%/20%/37% YoY to INR121.1b/ INR24.3b/INR20.4b. In 9MFY24, its revenue/EBITDA/PAT rose 21%/35%/32% YoY.

Volumes grew 22% YoY with ASPs growing 6.5% YoY to INR100.9/unit (est. INR100.7k). Net sales grew 30% YoY to INR121.1b (in line) in 3Q.

Gross margin contracted 50bp YoY/10bp QoQ to 28.9% (est. 28.8%) despite favorable FX. This was partially offset by better cost control, resulting in EBITDA growth of ~37% YoY to INR24.3b (est. INR24.2b).

EBITDA margin rose 100bp YoY/30bp QoQ to 20.1% (est. 20.1%).

Despite slightly lower-than-estimated other income, adj. PAT came in at INR20.4b (+37% YoY, in line).

Cash on the balance sheet as of Dec’23 stood at INR184.4b (vs. INR173.3b as of Sep’23).

Highlights from the management commentary

Domestic 2W- Retails grew 11% YoY for the industry in 3QFY24 and the management expects industry volumes to grow by 8-10% in the coming months. Festive demand was strong and it was further supported by healthy retails in Dec’23.

Exports- The macro environment is uncertain due to geopolitical issues. However, the continuing devaluation of emerging market currencies has eased now. Exports currently stand at 70% of peak FY22 volumes. However, volume grew ~2% sequentially during the quarter. Africa and South Asia are dragging down the recovery.

Triumph- In places like Bangalore and Kerala, BJUAT’s market share has reached 20% in the category. It plans to grow its footprint beyond 100 cities, covering 50% of the market. The current capacity now stands at 10k units per month and is being increased to 20k units, with a target to reach ~30k units in 1HFY25

EVs- 3W: BJAUT currently has a presence in 23 cities and plans to expand to 50 cities in 4Q and 400 cities before the season in 2024. Capacity has already been put in position. Chetak: It aims to achieve the 15k units per month sales mark, which will be driven by new launches and network expansion.

Valuation and view

Both domestic and export volumes are expected to recover in FY25 from the low base, driving a healthy earnings recovery. We expect BJAUT to benefit from market share gains over the long term, driven by: 1) the premiumization trend, 2) the opportunity in exports, and 3) the potential sizeable position in the Scooter market via EVs. However, a large part of its India profit pool (of premium motorcycle and 3Ws) is vulnerable to possible disruption from electrification.

At ~26x/23x FY24E/FY25E consolidated EPS, the stock’s valuation fairly reflects the expected recovery as well as the risk of EVs. We reiterate our Neutral rating with a TP of INR6,775 (based on 20x Dec’25E consolidated EPS).

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