The policy direction in the upcoming budget will be a key determinant of two wheeler industry growth, though we expect competitive intensity to remain elevated in the near term. Bajaj Autos operating margins continue to be impacted by 1) an inferior product mix as the share of entry level models now stands at 58.4% of sales vs.52/58% YoY/QoQ 2) fall in 3W volume(-1% YoY) and 3) unabsorbed material cost in exports. Thus, EBITDA margins declined to 15.6% vs. 16.8% QoQ. However, this was offset by higher other income at Rs.4.7 bn(+23% QoQ). Thus, the reported PAT at Rs. 11bn was up +16% YoY.