Bajaj Auto: CNG bike and exports to drive growth

livemint.com:

₹2,415 crore in the June quarter (Q1FY25) beat analysts’ estimates and was primarily driven by price realisation. The two-wheeler (2W) manufacturer is expected to maintain this momentum amid a recovery in the export market and from sales of the CNG bike it launched earlier this month. Still, an inadequate pick-up in rural demand or the export market remains a risk.

Bajaj’s Q1 revenue increased by almost 16% to ₹11,930 crore, helped mainly by better realisation as the company undertook price hikes, which also helped offset the increase in raw material costs. Accordingly, Ebitda per vehicle rose to ₹21,900, up 15% year-on-year and 1.5% sequentially. With material costs accounting for more than 70% of revenue, Bajaj Auto’s ability to pass on these costs is critical to its profitability.

A diversified market base across domestic sales and exports provides some stability to its revenue, although exports have been a sore spot of late. In Q1FY25, exports contributed 39% and 28% of Bajaj’s total 2W and three-wheeler (3W) volumes. While overall exports grew at a similar rate as domestic volumes in the quarter, exports to some markets fell by as much as 70%.

In the coming quarters, management expects three avenues to drive growth – the recently launched Freedom 125 CNG bike, the Brazil assembly plant commissioned last month, and electric vehicles (EVs). The CNG bike is strategically placed to tap price-conscious customers in the 125cc segment as it’s expected to cut running costs by half. The bike’s current production run rate is 15,000 a month and is expected to increase to 40,000 units by the end of FY25.