Two and three-wheeler maker Bajaj Auto reported better-than-expected earnings for the September quarter of FY27, driven by stronger realisations and resilient demand across domestic and export markets.
Brokerage firms Citi and Jefferies maintained their respective ratings on Bajaj Auto shares, with Citi flagging cost pressures.
Citi maintained its ‘Sell' rating on Bajaj Auto but marginally raised its target price to Rs 10,100 from Rs 10,000 per share.
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Citi said Bajaj Auto's Q2 FY27 results exceeded estimates, supported by better average selling prices (ASPs), reflecting production-linked incentive (PLI) benefits, favourable foreign exchange movements and higher export incentives.
The brokerage noted that management expects double-digit year-on-year growth in the domestic two-wheeler industry during the second half of FY27, supported by healthy festive demand and premium motorcycle sales. Export volumes are expected to sustain at around 7.5 lakh units per quarter.
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However, Citi cautioned that elevated commodity costs, including steel, copper, aluminium and electric vehicle components, remain a challenge. The brokerage also expects foreign exchange tailwinds to moderate in the December quarter, potentially putting pressure on margins.
Citi raised its FY27-FY29 earnings estimates by 0-2%, primarily due to slightly higher realisations, while keeping volume estimates unchanged.
Jefferies maintained its ‘Hold' rating on Bajaj Auto with a target price of Rs 11,500, raising its FY27-FY29 earnings estimates by 4-5%.
The brokerage highlighted that earnings before interest, taxes, depreciation and amortisation (EBITDA) and profit after tax rose 35-37% year-on-year in Q2 FY27, exceeding its estimates by 5-8%, supported by stronger realisations.
Bajaj Auto's volumes grew 20% year-on-year, led by 41% growth in exports, while domestic volumes increased 4%. EBITDA margins remained flat sequentially at 20.9%, despite commodity cost pressures.
Jefferies also highlighted strong electric vehicle traction, a recovery in export market share and plans to launch two new motorcycle brands in the 125cc-250cc segment in FY27. However, domestic motorcycle market share remains under pressure.
The brokerage considers Bajaj Auto's valuation of around 20 times FY28 estimated earnings reasonable.
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