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Prabhudas Lilladher Report
We marginally increase our FY24-FY26E earnings per share estimates of Bajaj Auto Ltd. by ~1% to factor in higher domestic realisation and continued three-wheeler volume strength.
Bajaj Auto’s Q2 revenue (Rs 108 billion) was largely inline, while Ebitda margin (19.8%) was slightly higher than our estimate (19.4%) and the street (19.5%). Ebitda margins benefitted from inventorisation and better mix QoQ, which was partially offset by lower export average selling price.
Export volumes recovered QoQ and Bajaj Auto is expecting only gradual improvement, given macro challenges in those markets. Bajaj Auto saw export realisation falling ~7% QoQ given increase in mix from lower ASP markets like African regions which have low ASP and margin.
Furthermore, increase in electric vehicle volumes will impact overall margins. We expect moderation in margin in H2 from current levels. Until now, Bajaj Auto had been witnessing a sharp increase in its three-wheeler mix, which was aiding margins; we expect this trend to start moderating sequentially.
We expect Bajaj Auto’s domestic premium segment volumes to grow (similar to the industry), market share gains in this and fast ramp-up of EVs could make us turn constructive on the stock.
Bajaj Auto is currently trading at 18.5 times FY25, on the higher side versus history.
Maintain ‘Reduce’ with a target price of Rs 4,800 (Rs 4,750 earlier) at 16 times September-25E earnings per share.
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Also Read: Bajaj Auto Q2 Results Review - Low Raw Material Costs, Favorable Mix Boost Margins: Motilal Oswal
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