Bajaj Auto: Q2-25 Earnings Call Highlights
Strong Q2-25. Optimistic about festive season. Initial demand trends are muted. Continuing to invest in EV space. Focus on unlocking capacity & scaling up Freedom. Expansion of Triumph brand in India
bajajauto.com | NSE: BAJAJ-AUTO
1. Key Takeaways
1.1 TLDR
Overall, Bajaj Auto reported a strong second quarter, showcasing its resilience in navigating market challenges and its commitment to innovation and growth in emerging segments.
The company’s strategic focus on electric vehicles and CNG technology, coupled with its robust financial performance, positions it well for continued success in the future.
The company is optimistic about the festive season, though initial demand trends are slightly muted.
Focus on sustaining margins through dynamic P&L management while continuing to invest in strategic growth enablers, particularly in the EV space.
Continued focus on unlocking capacity and scaling up Freedom, achieving further gains on the electric portfolio, and recovering exports, particularly in Nigeria.
Expansion of the Triumph brand in India.
1.2 Operational Highlights:
Record-breaking performance: Bajaj Auto reported record revenue, EBITDA, and PAT, driven by strong domestic and export sales, particularly in emerging segments like electric and CNG vehicles.
Growth in Emerging Segments: Green energy portfolio (Electric & CNG) constitutes 44% of domestic revenue.
Focus on profitability: Bajaj maintained a 20%+ EBITDA margin for the fourth consecutive quarter, despite significant investments in expanding the EV business.
New Growth Platforms: The company has established new growth platforms in the last 12 months, including CNG 2-wheelers (Freedom 125), electric 2-wheelers (Chetak), electric 3-wheelers, and the Triumph platform.
Global Expansion: The company continues to expand its global footprint, with notable success in Latin America and a recovery in the African market.
1.3 Key Themes:
Overall Performance:
Q2 FY25 revenue reached a record INR 13,000 crores, a 22% YoY growth.
EBITDA hit a record INR 2,653 crores, up 24% YoY, with a margin of 20.2%.
PAT (excluding exceptional items) reached an all-time high of INR 2,216 crores, a 21% YoY growth.
Strong free cash flow generation of over INR 2,000 crores during the quarter.
Surplus cash stands at a robust INR 16,400 crores.
Domestic Motorcycle Business Unit:
Maintained a strong position in the 125cc+ segment, which now comprises 55% of the overall industry.
Launched a new sporty 125cc Pulsar to target youthful buyers.
Freedom 125 CNG motorcycle received positive customer feedback, with retail sales exceeding 10,000 units and capacity expansion planned.
Aims to drive leadership in the 125cc+ segment through an invigorated Pulsar lineup and scaling up Freedom 125.
Export Business Unit:
Continued steady revival in overseas markets, with Latin America leading global growth at 20% YoY.
Asia's performance is almost at par with the previous year, while Africa continues to decline, albeit at a slower rate.
New plant in Brazil stabilized and running close to planned levels.
Aims to regain lost share in key markets like Nigeria and grow the Dominar brand.
Commercial Vehicles:
3-wheeler business clocked its highest ever volume of 140,000 units.
Electric 3-wheelers (e-autos) achieved a 35% market share, despite late entry, and are now available in 700 locations.
Aims to expand the e-auto network further and introduce new models.
Electric 2-Wheelers:
Chetak achieved the third position in the market, with a market share of 19% in Q2 FY25, almost double compared to the previous year.
New and upgraded Chetak range to be launched in mid-November, improving margins and competitiveness.
Distribution footprint to be expanded to 4,000 stores by January.
Aims to challenge for overall leadership in the 2-wheeler EV segment.
Pro Biking:
KTM continues steady performance in partnership with KTM Austria.
Triumph made two significant launches in September: an upgraded Speed 400 and the Speed T4.
Domestic sales of Triumph motorcycles reached close to 10,000 units in Q2, up 50% over Q1.
Aims to develop the Triumph brand to be synonymous with modern classics in India.
Captive Finance Company (BACL):
Steady rollout with over 70% coverage of Bajaj Auto stores.
On track to reach 100% coverage by January 2025.
Started posting cash profit in September.
1.4 Key Quotes
On Freedom 125: "Freedom 125 continues to hold out a strong promise of absolutely redefining the motorcycle industry."
On Chetak: "The new range combined with wider distribution and exclusive customer care capability position us to mount a strong challenge for overall leadership in 2-wheeler EVs."
On EBITDA margin: "Margins have continued to hold steady at 20.2%. This is the fourth quarter in the trough, where we've continued to hold the margin at that level."
On electric vehicle portfolio: "In the entirety of our electric portfolio, which is electric two-wheelers and electric three-wheelers, our EBITDA in the quarter has been flat in absolute terms."
1.5 Analyst Takeaways
Bajaj Auto's strong performance in Q2 FY25 demonstrates the effectiveness of its strategy to focus on emerging segments and maintain profitability.
The company's investments in EVs are paying off, with both Chetak and e-autos gaining market share.
The launch of Freedom 125 CNG motorcycle could be a game-changer in the Indian motorcycle market.
Continued expansion in key global markets, particularly Latin America, is expected to drive further growth.
The company's strong financial position allows it to continue investing in strategic growth opportunities.
Axis Bank Q2 FY25 Earnings Call FAQ
1. How has Axis Bank's asset quality performed in Q2 FY25?
Contrary to some perceptions, Axis Bank's asset quality has improved in Q2 FY25. Both gross NPAs and net NPAs have declined year-on-year and sequentially. Key indicators like gross slippage ratio and net slippage ratio have also seen improvements. The bank has also made prudent provisions for non-NPA assets to further strengthen its balance sheet.
2. Why did Axis Bank's provisions and contingencies increase despite improved asset quality?
While loan loss provisions decreased, the bank proactively added to its non-NPA provisions. This addition of ~INR 520 crores is a precautionary measure to enhance balance sheet robustness and is not indicative of expected NPA increases.
3. Why did Axis Bank's Net Interest Margin (NIM) decline?
The reported NIM decline is primarily due to the absence of a one-time income tax refund interest received in the previous quarter. The core business spreads have remained relatively stable.
4. What is Axis Bank's strategy to manage its Credit Deposit (CD) ratio?
Axis Bank is comfortable operating within its current CD ratio band and does not plan to sell down its retail portfolio for CD ratio management. They are following regulatory guidance and believe their current CD ratio is appropriate.
5. How is Axis Bank addressing concerns about stress in the unsecured lending portfolio?
The bank acknowledges industry-wide stress in unsecured lending, including credit cards and personal loans. They are taking proactive steps to manage this by tightening scorecard cut-offs, curtailing spending limits, and closely monitoring portfolio performance.
6. Why hasn't the CASA deposit base grown significantly despite efforts to acquire more salary accounts?
While the CASA ratio has remained relatively flat, the bank has focused on attracting granular, sticky deposits through salary accounts and premium accounts. They are also prioritizing deposit growth from all business segments. The overall deposit growth rate is higher than the industry average.
7. What is the impact of the recent RBI regulations on private sector bank investments in subsidiaries on Axis Bank?
Axis Bank is currently evaluating the implications of the draft circular and will seek clarifications where needed. They will determine their course of action once the final guidelines are released, ensuring any decision is in the best interests of their shareholders.
8. What is Axis Bank's outlook on borrowing costs and margins?
While a change in the RBI's stance to neutral has been noted, the likelihood of an immediate rate cut appears low given the recent inflation figures. Axis Bank expects borrowing costs to stabilize once there is a definitive shift in the RBI's rate guidance. They maintain a structural NIM guidance of 3.8% on a two-cycle basis and aim to preserve the cushion above this guidance.
Source: Link to Earning Call Transcripts
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