Bajaj Auto's June quarter of FY27 (Q1FY27) earnings reinforced the Street's confidence in the company's export franchise, but brokerages said the next leg of the stock's re-rating will depend on whether it can regain momentum in the domestic market.
While Morgan Stanley highlighted record exports and resilient margins as the key positives from the quarter, it maintained that a sustained improvement in domestic market share remains the biggest monitorable for FY28.
Jefferies, on the other hand, pointed to the company's ability to protect profitability despite commodity cost pressures and expects upcoming product launches to support growth over the medium term.
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Brokerages Decode
Morgan Stanley
- Maintained Underweight with a target price of Rs 9,259.
- Said FY27 is shaping up to be another strong year for exports.
- Believes a revival in domestic market share remains the key trigger for a re-rating.
- Said exports and a weaker rupee should continue to support near-term earnings.
- Noted that EBITDA margins remained resilient, aided by foreign exchange gains, a premium product mix and operating leverage despite raw material cost pressures.
- Highlighted that exports reached a record high, led by strong growth in Latin America, Africa and commercial vehicles.
Jefferies
- Maintained Hold and raised the target price to Rs 11,500 from Rs 10,500.
- Said the company delivered strong margins despite commodity cost headwinds.
- Noted that domestic two-wheeler demand continues to hold up well, while exports remain strong.
- Highlighted management's plans to launch two new Pulsar motorcycles by September and two new brands during FY27.
- Raised FY27-FY29 earnings estimates by 6-8%.
Bajaj Auto Q1 Performance
The automaker reported a 42.3% year-on-year (YoY) rise in net profit to Rs 2,983 crore in the June quarter of FY27, while revenue from operations (topline) jumped 37% annually to Rs 17,244 crore.
At the operating level, earnings before interest, tax, depreciation and amortisation (EBITDA) surged 44.9% YoY to Rs 3,595 crore, with the EBITDA margin expanding to 20.8% from 19.7% a year earlier.
The domestic business recorded 26% revenue growth, supported by double-digit expansion across both the two-wheeler and three-wheeler segments, the company said. Electric vehicles (EV), which now account for nearly 30% of the domestic business, nearly doubled their revenue despite capacity constraints.
According to Bajaj Auto, exports delivered their best-ever quarter, with both revenue and volumes reaching record highs and shipments crossing 700,000 units for the first time. The company added that growth was led by Latin America, while revenue from Africa more than doubled, supported by a three-fold increase in Nigeria. Commercial vehicle exports also grew around 70% despite logistical and geopolitical challenges.
The company also reported strong momentum across its premium motorcycle portfolio, with the Pulsar, Avenger and Dominar brands posting double-digit growth. The KTM and Triumph businesses recorded 60% YoY growth in domestic revenue, while the Chetak electric scooter business delivered record volumes, revenue and profitability.
Bajaj Auto generated more than Rs 2,300 crore in free cash flow during the quarter and ended June with surplus funds exceeding Rs 21,000 crore, providing flexibility to fund future growth initiatives.
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