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Bajaj Auto reports operationally inline performance in Q1FY23, ASP's rise however surprises positively!

ICICIdirect Research 26 Jul 2022 DISCLAIMER

What's Buzzing: 

Bajaj Auto (BAL) reported steady performance in Q1FY23 and was operationally in line with our estimates. EBITDA margins for the quarter came in at 16.2%, down 92 bps QoQ. Gross margin decline for the quarter was lower than anticipated (at ~30 bps QoQ) however higher employee costs (up ~90 bps QoQ) dented the overall margin profile 

Context: 

In Q1FY23, for BAL, total operating income stood at ₹8,005 crore, flat QoQ with average selling price (ASP) coming in at ₹ 83,210/unit, up 5.2% QoQ. Sales volumes for the quarter stood at 9.3 lakh units, down 4.4% QoQ. EBITDA in Q1FY23 stood at ₹1,297 crore with consequent PAT at ₹ 1,173.3 crore, down 20% QoQ. Muted PAT performance was due to onetime exceptional gain of ₹315 crore (incentive receivable from the state government of Maharashtra for the period April 2015-March 2021) booked in Q4FY22. 

Perspective: 

Overall quarterly performance of BAL in Q1FY23 was on expected lines. Sequential rise in ASP’s however was the real surprise despite lower share of 3-W’s in the overall sales volume mix. The 3-W share in volume declined ~280 bps QoQ to 9% in Q1FY23. Export mix however improved with exports volume share pegged at 62% in Q1FY23 vs. 60% in Q4FY22. Bajaj Auto is the prominent player in the domestic motorcycle space with market share pegged at ~18.2% for FY22. On the monthly sales volume front company has witnessed some setback due to persistent chip shortages. It is presently executing a share buyback program amounting to ₹ 2,500 crore at a maximum buy-back price of ₹ 4,600/share through open market route. The company has commenced upon its journey towards electrification with Chetak scooter, with sales volume in this domain pegged at ~8,200 units in FY22 and successful commissioning of EV facility under Chetak Technology Limited. Company’s product on the E 3-W space is however still awaited. The key monitorable going forward at Bajaj Auto would be demand outlook in domestic and international markets and further affirmative steps on electrification.

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