Bajaj Auto

Basis of our Recommendation

Bajaj Auto's recent developments indicate a strong growth trajectory, primarily driven by management's focus on expanding production capacity to 9 million units and a robust product pipeline, particularly in the 125cc+ motorcycle segment. The company's successful navigation of commodity inflation through strategic pricing and an improved product mix has helped maintain stable EBITDA margins around 20.9%. Furthermore, the Chetak EV business has reached a positive EBITDA inflection point, contributing significantly to domestic revenue. Vista's financial outlook reflects an expectation of accelerating revenue growth beyond historical levels, supported by strong export demand and a favorable market position. However, potential headwinds include rising conversion costs and supply chain challenges, which could impact margins. The industry context remains favorable, with increasing consumer demand for electric vehicles and supportive government policies, although inflationary pressures and competitive dynamics pose risks. Over the next 12-24 months, key opportunities lie in capturing market share in premium segments and expanding the EV portfolio, while watchpoints include managing cost inflation and competitive intensity in the domestic market