Bajaj Auto - Richer Mix To Drive Overall Growth: Prabhudas Lilladher

Prabhudas Lilladher Report

We met with the management of Bajaj Auto Ltd. wherein the management gave a detailed overview of its two-wheeler/three-wheeler/electric vehicle businesses.

The management expects African volume to continue to be under pressure due to currency devaluation; however, the absence of African volume has been offset by a better mix in its international volume. Its Triumph launch has been well received in the U.S. and UK, its key markets. The management aims to gradually scale up the production of Triumph to ~10,000 units/month (currently at ~6,000 units/month).

Bajaj Auto launched E-3W in Q3 FY24 in certain markets, where it has become one of the leading players aided by its strong brand . Additionally, E-3W profitability is on par with ICE powertrain, while the path towards profitability for E-scooters will be gradual. Bajaj Auto remains optimistic on its growth prospects, which will be led by a robust product portfolio for domestic and international markets.

We foresee healthy demand from rural and urban markets driven by new launches across categories and strong presence in the 125+cc space. Positive demand momentum coupled with network expansion in E-3W/2W shall further aid in volume expansion.

Factoring this, we estimate its revenue/Ebitda/adjusted profit after tax to grow at a CAGR of 13.8%/18.4%/16.7% over FY24- FY26E. Given the high growth rate in E-scooters/3W, market share expansion and consistent mix improvement, we change our rating from ‘Sell’ to ‘Hold’ and revise our target price upwards to Rs 9,984 valuing the company at 27 times (20 times earlier), factoring in the high growth rate in the EV and premium segments.

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