Bajaj’s Q3 Ebitda beat our estimate by 11% with positive surprise in ASP and margins. Domestic motorcycle industry is clocking single-digit growth and is looking stable. The trouble for Bajaj comes from the export market, where its volumes are declining around 30% YoY. Revenue grew 3% YoY (4% beat), with 17% decline in volumes offset by spike in average realisation. Export and domestic volumes saw YoY decline. Gross margin (GM) improved 280bps QoQ (130bp beat), due to lower commodities and USD appreciation. Ebitda margin expanded 180bps QoQ to 19.1% (130bps beat). Absolute Ebitda came in 11% above our estimate. Lower other income restricted the PAT beat to 5%.
Management mentioned that exports may start improving only in May/Jun, as retails are weak and USD availability is an issue in LatAm and Africa. It mentioned that adjusted for base effect, domestic motorcycle industry is growing 3-5%. Bajaj would clock higher-than-industry growth in Jan-Jun period (base effect due to chip issue in 2022). However, compared to 3Q, Bajaj’s motorcycle market-share would be stable at 17- 18%. Overall volumes are being dragged down by weakness in exports. Analysts at IIFL Securities expect YoY decline in exports to continue for two more quarters.
Analysts at IIFL Securities believe Q3 results reflected the best of everything (commodities, currency and mix). While commodities may be stable in Q4, it may start getting adverse from Q1FY24. They expect the rich mix in domestic 2W to normalise starting Q4. Analysts have increased their FY23-25ii EPS estimates by 1-3%, driven by slight increase in ASP and margins. Retain ADD at target price of Rs 4225. At 16x FY24 EPS with 5-6% div yield, they find the stock attractive.
