Bajaj Auto’S (BAL) Q4FY21 margins were a beat on consensus expectations at 17.7% (down 65bpsYoY). BAL’s margin resilience was driven by rise in export mix (up 340bpsYoY at 46.4%) and increased share of Pulsar-125cc has led to superior domestic motorcycle mix (share up 13.7% to 26.3%). Management’s focus on building on electric vehicles starting with Chetak is a long term positive. They believe existing incumbents are well placed in terms of technology distribution and brand to handle the potential entry of PE-backed start-up companies in 2Ws. We believe BAL’s key drivers of profitability remain exports demand in commodity markets (e.g. Africa, LatAm), exports incentives/FX benefits, c) premiumisation in domestic market. The stock remains attractive at <15x PE /5.4% FCF yield on FY23E basis. We maintain ‘buy’.
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