Bajaj Auto Ltd Q1 FY2024 Concall Summary

Key Takeaways

• All-time high revenue and profit, but exports still a drag: Revenue, domestic revenue, EBITDA and PAT all hit record levels, yet export volumes remain well below peak and the recovery is explicitly gradual.
• Domestic motorcycles gained 2% share in the premium 125cc+ segment, helped by a weak base and Pulsar upgrades; the company expects to keep outpacing the 4-6% industry growth.
• Triumph launch is off to a fast start with 17,000 bookings, but the real test is converting those into deliveries and ramping production to 5,000 units/month by September.
• Margins held at 19% despite mix headwinds from seasonal commuter demand and growing Chetak EV volumes; management is comfortable at these levels barring a VUCA shock.
• What to watch next quarter: Whether Triumph production hits the 5,000/month target, the pace of electric 3-wheeler scale-up from September, and any further sequential improvement in export volumes.

Domestic Motorcycle & 3-Wheeler Momentum

• 125cc+ segment driving share gains: 70% of Bajaj's motorcycle mix now comes from 125cc and above, up from 60% a year ago, and the company gained at least 2% market share in this segment during the quarter.
• Pulsar delivered a standout quarter: The franchise crossed 4.2 lakh units globally with revenues over INR3,300 crores; the upgraded NS series grew sales 50%, lifting both revenue and EBITDA.
• Industry backdrop is supportive: After an April decline, domestic motorcycle retail grew 4-5% in May and June; Bajaj's retail growth hit 19%, flattered by the prior year's chip shortage but still a strong absolute performance.
• 3-wheeler resurgence is complete: Sales of 32,000 units/month have surpassed the pre-COVID peak of 30,000, and market share has climbed from 70% to almost 80%, driven by CNG adoption on an expanding gas network.
• Base effect will distort reported billing growth: Retail momentum is expected to sustain, but Q2 last year saw pipeline rebuilding that inflated billings; management flagged that half 1 over half 1 will show growth even if Q2 standalone comparisons look soft.

Export Recovery: Gradual, Not a Step Jump

• The downward trend has halted: Export volumes, which had been declining since Q1 of the prior year, showed sequential recovery over Q4, led by Africa (up 41% for Bajaj vs 34% for the industry).
• Nigeria is improving but still fragile: Forex reforms and fuel subsidy removal have eased forex availability and LC confirmation, but 25% inflation and higher fuel prices continue to pressure demand; the situation is "not fully settled."
• Philippines suffered a temporary dislocation: New vehicle registration norms disrupted demand for 3-4 months; the adoption process is in its final stages and retails are expected to normalize in a month or two.
• Recovery will be incremental, quarter by quarter: Management expects each quarter to be larger than the previous one, but explicitly ruled out a step jump; restoring volumes to the FY22 peak of ~200,000 units/month "could be some while."
• Fundamental demand drivers remain intact: Demographics, low penetration, urbanization and road construction all support a future expansion cycle, but the timing depends on macroeconomic stabilization that is "very difficult to understand."

Rakesh Sharma: "I cannot say the timeline when it will exactly reach 200,000. But I will just say one last thing on this is that in most of the markets, fundamental drivers of demand are intact... when the macroeconomics allows, I think that we will see a period of big expansion. Now exactly when it will come, is very difficult to understand."

Triumph: Early Bookings Strong, Execution Phase Begins

• Launch exceeded initial expectations: Over 17,000 bookings were received from just 15 dealership centres; dispatches commenced during the quarter and first customer deliveries are starting now.
• Network is scaling rapidly: From 17 towns currently, the dealership footprint will expand to 44 towns with over 50 stores by end of Q2, covering about 60% of the addressable market by year-end through at least one store.
• Production ramp-up is the next milestone: Management hopes to hit a production rate of 5,000 units per month within Q2, most likely in September; exports will commence from October, with the ramp-up plan for Oct-Dec to be decided next month.
• Customer profile is distinct from Bajaj's core: The buyers are "absolutely new" to the Bajaj ecosystem, coming from the 250-500cc aspirant segment rather than the Pulsar community, which de-risks cannibalization.
• Product pipeline extends beyond the launch: One or two more models are planned over the next year or so, with a cadence of roughly one model or variant per annum added to the portfolio.

Rakesh Sharma: "This is an absolutely new set of customers. They are not really from the heartland of, let's say, the Pulsar communities, majority of them are coming from the heartland of the 250 to 500cc segment aspirants."

Electric Vehicles: Chetak Reset, 3-Wheeler Scale-Up

• FAME subsidy cut disrupted Chetak's trajectory: The government reduced subsidies effective June 1, causing a surge in May retails and a drop in June; the industry settled at ~72,000 units/month, similar to Q4 levels.
• Chetak's near-term target is on hold: The aspiration to reach 10,000 units/month has been paused while management waits to assess the "new normal" after the subsidy reset; the strategy is to stay competitive, expand the network to 120 cities by end of Q2, and focus on reducing component sourcing costs through supply chain and R&D.
• Electric 3-wheeler confidence is building faster than planned: Passenger and cargo versions were launched in one city each during Q1; the passenger response has been "outstanding" and range has exceeded expectations, prompting management to accelerate the scale-up timeline.
• Scale-up begins September, targeting ICE-restricted markets first: The initial plan was to stay low-key for 3-6 months, but confidence now supports a phased scale-up from September, prioritizing the 300 RTOs (out of 1,000) where ICE and CNG vehicles are not permitted.
• EV capex is material and committed: INR400-500 crores is allocated for EV-related capex this year, including a new dedicated facility for electric 3-wheelers at the Waluj, Aurangabad site.

Rakesh Sharma: "We earlier had a plan that we'd probably keep it at a very low key for 3 to 6 months. But this has given us confidence that we can scale up earlier. So, we will start to scale up in a phased manner from September onwards itself, I think."

Margins: Comfortable at 19%, Mix Headwinds Managed

• Q1 margin held at 19.0%, down only 30 bps QoQ: The sequential dip was driven by an adverse mix shift toward commuter motorcycles (marriage season) and growing Chetak EV volumes, partially offset by operating leverage from higher volumes.
• Gross margin fell 200 bps QoQ on mix, not pricing: The decline was entirely mix-driven; price vs cost was managed (1% pricing covered material cost inflation and OBD2A compliance), currency impact was negligible (INR 82.1 vs 81.5), and operating leverage provided a partial offset.
• YoY improvement of 280 bps is real but base-aided: The prior year's Q1 was also skewed toward commuter motorcycles due to the marriage season, making the YoY comparison flattering; the underlying margin structure is stable.
• Commodities are stable, pricing pressure is absent: Steel, aluminium, copper, nickel and platinum saw a slight uptick early in the quarter that reversed by quarter-end; management sees no pressing need for price hikes to cover commodity inflation.
• Future mix headwinds are acknowledged but manageable: Growing Chetak volumes and a recovering export/Boxer mix will pressure margins, but management aims to hold current levels through operating leverage and dynamic price-cost management, without committing to a specific target range.

Dinesh Thapar: "The overall margin levels of 19%, give or take a few, as you've seen us, leaves us quite comfortable unless, of course, there are any VUCA events, we are quite comfortable with the margin situation as it currently stands."

Brazil: From Contract Manufacturing to Owned Facility

• Early traction in São Paulo: Retails of three models under the Dominar banner began in January; the Dominar 400 captured 15% share in São Paulo City, but supply has been constrained by the contract manufacturing arrangement.
• Board approved a manufacturing unit to remove the bottleneck: Bajaj Brazil will set up a facility in the Manaus special economic zone, expected to come on stream within 12 months; management views removing the supply constraint as "key to a high level of performance."

Rakesh Sharma: "We believe removal of the supply constraint is key to a high level of performance in this important market and taking note of this, the board has today approved the setting up of manufacturing unit by Bajaj Brazil in Manaus special economic zone."

Guidance & Commitments

Key Metrics