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BJAUT’s Q3 margin performance was healthy (up 27bps QoQ to 20.1%, on better mix, operating leverage). Domestic 2W recovery continues, and is broadening (refer to ‘2Ws to re-rate further – ‘TINA’ factor at play’); however, exports revival is yet to pick up meaningfully – with commentary staying muted. Further, the best of the 3W rebound from the Covid-affected base is now behind (with E-3W emergence a structural threat to BJAUT’s most lucrative business division). Amid the sharp run-up in valuations (now over 1SD above LTA), we retain REDUCE with unchanged TP of Rs6,800 (20x its core FY26E multiple + Rs800 cash/investment per share), building-in ~13%/~12% volume/EPS CAGR over FY24E-26E (our estimates are largely unchanged). We prefer TVSL in 2Ws (similar business model with bottom-up share gains, margin triggers).

Healthy beat on margins

Revenue grew 30% YoY to ~Rs121.1bn (~3% above Consensus). Volumes during Q3 grew 22% YoY (+14% QoQ), with ASPs rising ~6% YoY (-1% QoQ). EBITDA grew ~37% YoY to Rs24.3bn, coming in at 6% above Consensus estimates, with EBITDA margin rising by 98bps YoY (+27bps QoQ) to 20.1% (Consensus estimate: 19.4%), driven by operating leverage. Consequently, adjusted PAT grew ~37% YoY to ~Rs20.4bn (a ~6% beat). Exports/Spares revenue stood at USD450mn/Rs13bn, respectively.

KTAs from Earnings Call

i) Domestic 2W segment has continued to recover post-festive; Company expects 8-10% growth for the industry going ahead. ii) Targets new variant launches in domestic motorcycles each month, with the larger cc Pulsar to be launched next year; aims to pull entry-level customers into the 125cc fold; CNG motorcycle to be launched in FY25. iii) Exports volumes are at ~70% of the FY22 peak (Africa/South East Asia/Latin America at ~50%/103%/107% of the peak); recovery has been slower than anticipated, amid continuing currency availability/devaluation issues in the Africa market in particular – with the recent developments at the Red Sea to be watched (could impact container availability, shipping time & costs); revival to be gradual (expects ~2-5% QoQ growth in Q4). iv) BJAUT’s 3W market share is 77% (80% in CNG); aims to take it to 80% in coming times; has over 50% share in several markets, where E-3Ws have been introduced; would cover 50 cities by Q4 and 200 by CY-end. v) Electric scooter Chetak now covers ~80% of the market (160 cities); BJAUT targets 15K units/mth in Q4 on the back of a newly-launched premium variant, network expansion, and better pricing (now priced closer to competition). vi) Triumph supplies to expand to 30K units/qtr by H1FY25 (incl. for exports) vs. 10K now; has 15-20% share in markets like Bangalore. vii) Expects some RM pressure in Q4; EV margin could benefit from operating leverage, lower lithium prices; but it would be watchful of competitive pricing dynamics; PLI certification could be close. viii) Expects ending FY24 with over Rs200bn surplus cash (~Rs180bn now)

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