Bajaj Auto Ltd. share price target

Update Note

After a recent correction in stock prices, we upgraded from HOLD to BUY rating.

Broadly in line with our estimate, Bajaj Auto’s Q3 standalone EBITDA grew 6% y/y to Rs25.8bn. Our positive stance on the company is backed by 1) expectations of cyclical upturns in 2Ws (domestic/ exports); 2) its vigorous EV strategy and 3) margin expansion from rising economies of scale and cost-cutting measures.

We maintain our HOLD rating on the stock.

BJAUT's Q2FY25 revenue jumped 22%/10% YoY/QoQ to Rs 131bn aided by volume growth of 16% and favourable mix aiding faster growth

BJAUT’s Q2 results were marginally weak on lower ASPs. BJAUT’s 2W retail growth has been muted (FY25YTD: 6.7%; Sep-Oct: 5.7%).

BJAUT's 2QFY25 performance was in line with our estimates. EBITDA margin remained stable QoQ at 20.2% as the impact of an adverse mix and raw material inflation was offset by price hikes.

APAT stood at Rs 2216 crore (against estimate of Rs 2228 crore) on a 21.8% growth in revenue and 40 bps expansion in EBITDA margin on y-o-y basis.

We met with the management of Bajaj Auto (BJAUT) to get an update on the different segments of the business. The management anticipates a 7-8% volume growth in the domestic 2W industry in FY25.

We reiterate our BUY call on Bajaj Auto Limited (BAL), as it has been registering healthy volume growth though export is yet to recover fully.

BJAUT’s 1QFY25 performance was in line with our estimates. Margins remained stable QoQ, despite EV ramp-up, due to PLI accrual and favorable forex.

However, at the CMP, the valuation appears full (stock is currently trading at 24.7x 12MF consensus P/E), and as a result, we maintain our HOLD rating on the stock.