The Bajaj Auto share price jumped nearly 4% today, October 28, after its quarterly results beat the Street’s estimates. Brokerages see new product launches driving growth in the domestic market, and exports are expected to continue to do well. However, some margin pressure is likely in the near term from rising commodity costs.
Bajaj Auto on Tuesday reported a 35.2% year-on-year (YoY) increase in standalone net profit to Rs 3,353.76 crore for Q2FY27, beating Bloomberg estimates of Rs 3,152 crore. Strong export demand and growth in its electric vehicle portfolio supported the company’s performance for the quarter.
Its revenue from operations rose 34.1% YoY to Rs 20,003.43 crore, crossing the Rs 20,000-crore mark for the first time, from Rs 14,922.05 crore a year ago. It beat Bloomberg estimates of Rs 18,918 crore. Earnings before interest, tax, depreciation, and amortisation (EBITDA) increased 36.7% to Rs 4,170.83 crore from Rs 3,051.66 crore in the year-ago quarter, against estimates of Rs 3,909 crore. EBITDA margin expanded to 20.85% from 20.45% a year ago.
Global investment bank Jefferies retained ‘Hold’ rating on Bajaj Auto, and has a price target of Rs 11,500, implying an upside of around 10% from the current price of Rs 10,490 apiece.
The company’s EBITDA margin has recovered despite severe commodity inflation. However, the management seemed a bit cautious on the margin outlook for the near term as commodity prices continue to rise and the rupee has slightly strengthened of late. Jefferies expects it to deliver an EBITDA margin of 20-21% in FY27 to FY29.
Bajaj Auto plans to launch two new brands in the 125-200cc bikes in FY27. “2W demand momentum remains strong in both India and export markets. Bajaj is doing well in EVs and has regained some share in exports, although domestic motorcycle market share has been under pressure,” Jefferies said.
Nomura has maintained its ‘Buy’ rating on the stock but reduced the target price by 3% to Rs 11,855. This implies an upside of 13% from the current price.
Nomura sees strong growth continuing in EVs and healthy growth in exports. The key catalyst will be the success of two new brand launches in the domestic market. Growth in the local market is expected to be led by Chetak.
The brokerage has lowered its EBITDA margin forecast to 20.3% for FY27 from 21.1%, due to some more cost pressure in the near term due to high commodity prices. For FY28, it has lowered EBITDA outlook to 21.1% from 21.4% and to 20.3% for FY29 from 20.8%.
The domestic brokerage has maintained its ‘Buy’ rating on the stock, with a target price of Rs 12,600. This implies an upside of 20% from the current price of Rs 10,490 apiece.
The company is expected to gradually recover market share in the domestic motorcycle market, driven by a healthy launch pipeline. Bajaj Auto’s export outlook continues to be healthy, with the management targeting over 250,000 units per month in the near term.
Motilal Oswal has raised its earnings per share (EPS) estimate by 5% for FY27, on the back of a better-than-expected top line in Q2 due to higher PLI income and export incentives. The company also continues to outperform even in electric vehicles, both two-wheelers and three-wheelers.
“Given the strong earnings forecast, healthy return ratios, among-the-best dividend payouts and a resilient business model, valuations at 21.8x/18.9x FY27E/FY28E EPS appear attractive,” the brokerage added.
Brokerages expect two new launches and strong exports to drive growth in the coming quarters. However, rising commodity prices could pose some challenges in the near term. Bajaj Auto continues to outperform in EV sales as well, and plans to expand this segment.