Bajaj Auto's Q1 Ebitda beat analyst estimates on better realisation and PLI incentives. Analysts see steady domestic volumes for the two-wheeler maker ahead, with the recently launched CNG model motorcycle receiving positive feedback. Exports recovery could be gradual, they said.
Overall, while analysts stayed positive on Bajaj Auto's prospects, expensive stock valuations following a 100 per cent surge in Bajaj Auto shares in the past one year are making some of them believe the risk-reward is unfavourable on the counter.
"Favourable product mix, robust vehicle sales along with lower input cost helped Bajaj Auto maintain double digit margins. The company continues to strengthen its product portfolio with the introduction of Pulsar NS400Z in the premium segment, Chetak in the EV-2W segment and the introduction of its new Freedom 125 in the 125cc segment," said Parth Shah, Research Analyst at StoxBox.
Shah said the key area to focus would be the Bajaj Auto's plan to position its new CNG bike 'Freedom 125' in the market and how it plans to drive growth in the 125+cc segment. "We anticipate strong rural demand, positive urban demand, new products, better finance availability and a favourable base effect to drive improvement in domestic volumes. Bajaj recently launched a 125cc CNG model, which has received a positive response. Led by a ramp-up in sales for this 125cc CNG model and launch of more variants (especially 100cc CNG model), we have factored in 60,000 units in FY25E and 240,000 units in FY26E," Nuvama said in a note.
The brokearge sees a 10 per cent CAGR growth in exports over FY24–27E due to improving demand in Latin America/ASEAN regions, gradual recovery in the Africa region and a favourable base.
On three-wheelers, it sees domestic 3W volumes to see 7 per cent CAGR over FY24–27E, led by replacement demand and improved business/economic activity. In the case of export market, Nuvama sees 11 per cent CAGR in 3W exports (including quadricycle) due to better demand in Latin America and ASEAN regions, entry of quadricycle in the Egypt market and a low base.
Emkay Global has raised its FY26 EPS by 2.6 per cent (higher margin) and introduced FY27 estimates (13 per cent FY24-27E EPS CAGR).
"We retain Reduce and revise target price to Rs 8,300 per share (roll over core 23 times multiple to Jun-26) + Rs 900 cash & investment per share. We prefer HMCL in 2Ws amid growth/re-rating triggers and an attractive risk-reward," it said.
Nuvama said it is building in a revenue CAGR of 11 per cent and Ebitda CAGR of 14 per cent over FY24–27 with an average return on equity (RoE) of 35 per cent. "Maintain ‘BUY’ with an unchanged target price of Rs 12,000 based on 35 times Sep-26 core earnings plus cash/investments of Rs 770 per share," it said.