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Target: ₹3,586
CMP: ₹3,727.05
Bajaj Auto’s Q4-FY22 EBITDA margin came in at 17.1 per cent (up 191 bps q-o-q) vs our estimate of 15.6 per cent, with gross margin up 282bps q-o-q despite adverse input material costs.
Better export mix (about 60 per cent), price hikes (about 1 per cent), higher 3W/ premium model mix supporting higher ASP (up 7 per cent q-o-q) drove gross margin expansion, we believe, despite under-recoveries against commodity inflation.
Flattish exports q-o-q and deferral of RM cost pass-through to Q1-FY23 are likely to impact nearterm gross margin as, despite price hikes in Q4 (about 1 per cent) and April (about 2 per cent), Bajaj Auto would still face under-recovery against commodity inflation.
Domestic 3W grew 15 per cent y-o-y with strong market share gains in CNG segment (77 per cent share). We look forward to launch of new variants of Pulsar amidst 2W market recovery from H2-FY23, with base effect coming in and TCO stabilising.
We don’t see EV as a major growth driver or obstacle in FY23/FY24 for Bajaj Auto. Downgrade to Reduce from Hold.
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