Bajaj Auto’s share price experienced a significant drop of over 3% in early trade on Thursday, following the company’s strong earnings report for the first quarter of FY25. The stock fell as much as 3.72% to ₹9,345.95 per share on the BSE, reflecting a cautious sentiment among analysts regarding the stock’s valuations.
Bajaj Auto, a leading manufacturer of two and three-wheelers, reported a net profit of ₹1,988 crore for the quarter ended June 2024, marking a 19.4% increase from ₹1,665 crore in the same period last year. The company’s revenue from operations rose 15.7% year-on-year to ₹11,928 crore, driven by strong vehicle sales and record spares revenue. Total sales volumes for the quarter increased by 7% to 11,02,056 units, compared to 10,27,407 units sold in the same quarter last year.
The company’s operating profit, or EBITDA, grew by 24% year-on-year to ₹2,415 crore, with the EBITDA margin improving by 130 basis points to 20.2%. Despite these impressive financial results, analysts have maintained a mixed view on Bajaj Auto’s shares.
Nuvama Institutional Equities expressed a positive outlook on Bajaj Auto’s prospects, especially in the two-wheeler segment. The brokerage firm anticipates an 8% compound annual growth rate (CAGR) in volumes over FY24–27, supported by continued domestic growth and a strong recovery in exports.
Nuvama has also factored in the positive response to Bajaj Auto’s recently launched CNG model, which they expect to contribute 1% to volumes in FY25 and 4% in FY26. They project a revenue and EBITDA CAGR of 11% and 14%, respectively, over FY24–27, maintaining a ‘Buy‘ rating on the shares with an unchanged target price of ₹12,000.
Motilal Oswal found Bajaj Auto’s Q1 results to be in line with their estimates. They foresee Bajaj Auto continuing to outperform the domestic motorcycle industry, particularly in the 125cc+ segment. However, they have slightly lowered their earnings estimates for FY25 and FY26 by 4% and 0.4%, respectively. They expect Bajaj Auto to gain market share in domestic motorcycles in FY25, aided by a shift in demand to the 125cc+ segment and a healthy launch pipeline. Nonetheless, the export outlook remains uncertain.
Bajaj Auto has seen a significant re-rating in the last 12 months, driven by market share gains in the 125cc+ domestic motorcycles segment, improved margins, and a unique policy to reward shareholders. Despite this, after the sharp rally, Motilal Oswal considers Bajaj Auto’s stock to be fairly valued at approximately 31x/25.5x FY25E/26E EPS, reiterating a ‘Neutral‘ rating with a target price of ₹8,695 per share.
Emkay Global shares a cautious view, noting that Bajaj Auto’s valuations remain expensive. They have raised their FY26 EPS estimates by 2.6% but retained a ‘Reduce‘ call on the shares, setting a target price of ₹8,300 per share.
Foreign brokerages also issued mixed ratings on Bajaj Auto shares. CLSA retained an ‘Underperform’ rating, citing expensive valuations and awaiting recovery in exports. UBS issued a ‘Sell’ rating, while Macquarie assigned a ‘Neutral’ call on the stock.
Over the past month, Bajaj Auto’s share price has fallen over 5%, though it has rallied more than 38% year-to-date. Over the past year, Bajaj Auto shares have risen by over 94%, reflecting a significant growth trajectory. As of 9:40 am on Thursday, Bajaj Auto shares were trading 2.54% lower at ₹9,461.35 per share on the BSE.
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