Commenting just on the RE part, there is potential to grow in the domestic market still and the new segment of international markets.
For India, rate of growth is debatable but can assign a 10-15 percent volume growth over the next 5 years. (Depends on the capacity expansion and the demand from less explored geographies among other factors). RE still enjoys its brand value and production capabilities. Margins/sales might remain same or lesser in the short term due to competition/ BS VI, but should catch up over the long run.
The way RE has designed its bikes is that it gives the owner a satisfaction of owning a premium brand above 250cc which is comfortable for long rides as well as daily commutes without being cumbersome and is durable with a superb resale value. This, IMO has given it an edge.
Moreover, by the introduction of twins at the price point of approx. 3L, they have created for themselves a market for not just new RE customers but the existing ones as well. For the approx 20L bikes sold in the past few years, RE 650cc and above is going to be a strong consideration when they decide to upgrade.
Note- This may be a strong bias from me because I own a bullet and have been very satisfied with it and will definitely want to upgrade to another RE in a few years. There is certainly an existing RE base which is not very satisfied with the maintenance issues and costs and they might not want to own another RE.
This management’s work over the last 10 years has been phenomenal. They were able to scale superbly with a healthy balance sheet, while introducing new models.
On the international front,
It is this work that gives confidence to me/blinds me that they are going to strive hard to create RE a global brand. Siddhartha Lal has emphasized their objective of taking RE at the global level and their efforts are being streamlined towards the same. The scale of opportunity that is there 7-8 years from now on the global front is high but the exact figure is unclear. 5,00,000 to 10,00,000 bikes is what some of the reports/Lal’s interviews say.
The emphasis is also clearly expressed in the launches of the 650 twins and their pipeline.
The obvious questions are -
1.How well can RE penetrate the markets it has identified?
2. What could be the impact of EV transitions?
3. How would competition react?
4. What would be the realisations?
Note - RE doesn’t enjoy the brand globally the way it does in India. So it’s all a big if.
I am willing to add more at dips as the story unfolds with the downside protection of maybe just a 10-12% return over the next 7-10 years but with a decent upside if RE does manage to be present globally at the scale they are envisioning and also if they play well the premiumisation trend in India.
Have not considered CV segment’s growth of earnings. Anything it adds is a bonus/margin of safety.
Disc - Invested recently at avg 21,000 levels. I also own a bullet. Hence, views maybe biased. Not a recommendation.