Target: ₹10,056
CMP: ₹8,901.55
Q2-FY26 results were in-line. Revenues grew 13.7 per cent y-o-y at ₹14,920 crore led by 5.8/+16.5 per cebt y-o-y/q-o-q increase in volumes while ASP grew 7.3 per cent y-o-y/+1.8 per cent q-o-q at ₹115.3k/unit (est ₹114.4k/unit). Gross margins expanded 130bp y-o-y (+30bp q-o-q ) at 29.9 per cent (est 29.6 per cent .
Better ASP (led by mix and currency) aided EBITDA growth of 15.8 per cent q-o-q/+23 per cent q-o-q at ₹3,050 crore (in-line) with margins expanded about 30bp y-o-y/+70bps q-o-q at 20.5 per cent (in line), despite RM impact of -40bp. Adj. PAT in line at ₹3,290 crore (+11.6 per cent y-o-y).
While a recovery in exports and a healthy ramp-up of Chetak and 3Ws are key positives, its market share loss in domestic motorcycles, that too in 125cc+ segment, remains the key concern. Co is banking on new launch to address the same with few products specific intervention. An effective turnaround of KTM operations and market share revival in domestic 2W remain key monitorable.
However, improved profitability for EV vertical and BACL is positive.
The stock is trading at around 22.7x/20x FY27E/28E EPS do partially reflect above challenges but lacks re-rating catalyst, as we build in healthy recovery in exports/EV portfolio. We upgrade the stock to Add (vs Neutral) with TP of ₹10,056 (vs ₹9,422) roll forwarded to 23x Mar’28 EPS plus Rs76/share value of NBFC BACL. We marginally tweak FY27/28 EPS to reflect on mix and fx.