Bajaj Auto, L&T Technology Q2 Results Review - HDFC Securities

HDFC Securities Institutional Equities

Bajaj Auto - Good show but headwinds ahead

Driven by a better mix and higher sales of spare parts, Bajaj Auto Ltd.’s Q2 revenue grew 21% YoY to Rs 127 billion (our estimate: Rs 128 billion). Freedom 125 retail sales stood at 10,000 till Sept-24, with an expectation to hit 18,000 by Oct-24. Based on positive feedback, Bajaj Auto is increasing capacity for Freedom 125 to 30,000 units per month in Q3, then to 40,000 units per month in Q4.

Bajaj Auto aspires to attain leadership in the 125cc segment, through the aggressive scale-up of Freedom 125, the new Pulsar lineup, and building the Triumph franchise. It is also focused on making a steady comeback in the export market.

While the raw material outlook is steady for Q3, we expect higher ad spending for promoting new launches, and slower recovery in key export markets to weigh on margins in the near term.

Rural recovery remains a key monitorable in H2 FY25. Maintain Sell with a SOTP target price of Rs 8,433, based on Sept-26 earnings.

L&T Technology Services - Guidance maintained; implies a high ask

L&T Technology Services Ltd. reported an in-line revenue, improving to slightly above the Q4 FY24 run-rate, led by growth in the Mobility and Sustainability segments. The growth in Mobility was led by software-defined vehicle programs and the company bagged four $10 million+ total contract value deals (versus three in the previous quarter), but Mobility growth is likely to be soft in Q3 due to seasonality (furloughs impact).

L&T Tech’s deal pipeline continues to be strong which provides revenue visibility in the near term while slower conversion in large deals continues to add volatility. The company maintained its organic revenue guidance of 8-10% CC, implying a strong acceleration/ask rate for H2 FY25E and an Ebit margin outlook of 16% in FY25E.

The management reiterated its $2 billion revenue aspiration over the medium term with Ebitm at 17-18%. Growth aspiration is nearly factored into current valuations. Risk-reward remains unfavorable; maintain Reduce on L&T Tech with target price of Rs 4,975, based on 28 times Dec-26E EPS.

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