Bajaj Auto: Sharekhan Recommends 'Buy' with Rs. 12,584 Price Target on Strong Domestic Growth & Export Recovery Hopes
Sharekhan has reiterated a "Buy" rating for Bajaj Auto Ltd (BAL) with a revised price target of Rs. 12,584. The brokerage firm is optimistic about the company's prospects, citing healthy domestic volume growth, a positive response to its new CNG motorcycle, and expectations for a gradual recovery in exports. The analysts believe BAL's superior profitability and strong brand positioning, along with a play in premiumization, will fuel its growth going forward.
- Strong Domestic Volume Growth: BAL has seen robust domestic volume growth, supported by a revival in rural markets and success in the 125cc+ segment.
- CNG Motorcycle Gaining Traction: The Freedom 125 CNG motorcycle is receiving a positive market response, potentially aiding market share gains.
- Expanding EV Footprint: BAL has significantly increased its market share in the electric two-wheeler segment and plans to expand its product portfolio in this space.
- Export Market Recovery Anticipated: Though export markets have faced challenges, a recovery is expected, especially in Africa.
- Sustainable Profitability: BAL has maintained strong EBITDA margins (~20%) through cost control measures and a favorable product mix.
BAL's strong performance in the domestic market is a key driver of Sharekhan's positive outlook. The company has been registering healthy volume growth, particularly in the 125cc+ segment and rural areas. The introduction of the Freedom 125 CNG motorcycle has been well-received by customers, and the company is planning to expand its manufacturing capacity to capitalize on this demand. BAL is also making strides in the growing electric two-wheeler segment, having increased its market share to about 14% and plans to expand its portfolio further. While the export market has faced some headwinds, particularly in Africa, Sharekhan anticipates a gradual recovery in the coming quarters.
Despite the positive outlook, the report highlights potential risks, such as continued weakness in export markets and unfavorable foreign exchange fluctuations. These factors could negatively impact the company's profitability.
Looking ahead, Sharekhan expects the Indian auto sector to continue its positive trajectory, supported by government infrastructure spending and rising rural demand. BAL's diversified product mix and geographical reach position it well to capitalize on this growth. The analysts believe BAL's emphasis on premiumisation and a focus on diverse segments will further strengthen its market position. Sharekhan's valuation is based on its FY2026 estimates, with a target price of Rs. 12,584, implying a potential upside for the stock.
The brokerage firm has used a forward-looking approach for its valuation, incorporating projections for the next two fiscal years. They base their target price on revenue, EBITDA, and PAT growth forecasts, combined with a multiple-based approach considering BAL's future growth potential and competitive positioning within the market.
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