Bajaj Auto Q4 Review: Decent Performance Amid Market Challenges, Says Jefferies

Jefferies has provided a mixed outlook on Bajaj Auto's fourth quarter performance, noting that the company's Ebitda and profit after tax grew by 6% year-on-year, surpassing their estimates by 4-5%. This growth was driven by better average selling prices, the brokerage noted.

But, there are concerns about the dip in domestic motorcycle market share and a decline in volume share in India's two-wheeler exports, it noted.

Still, the brokerage remains optimistic about Bajaj's growth prospects in the electric vehicle segment. It expects a 13% EPS compound annual growth from FY25 to FY28, but maintained a 'hold' rating due to the high valuation.

Bajaj Auto reported a revenue increase of 5.8% to Rs 12,148 crore, slightly above the estimated Rs 12,113.02 crore.

Ebitda rose by 6.3% to Rs 2,451 crore, again exceeding the estimate of Rs 2,434.14 crore. The Ebitda margin expanded by 20 basis points to 20.2%, compared to the estimated 20.1%.

Net profit also saw a rise of 5.8%, reaching Rs 2,049 crore, surpassing the estimated Rs 2,013.12 crore. The company declared a final dividend of Rs 210 per share for FY25 and generated a free cash flow of Rs 6,500 crore.

The brokerage noted that, Bajaj Auto's domestic motorcycle market share has fluctuated between 9.8% and 12.2% over the past decade, settling at 11.6% in FY25. However, its electric two-wheeler market share has increased from 11% in FY24 to 24% in the first five months of 2025.

Despite this, the motorcycle market share has slipped from 18.2% in FY24 to 16.6% in FY25. Bajaj plans to launch a new entry-level 125cc bike in FY26 and enter the e-rickshaw market in July, Jefferies said.

Exports have shown growth, with India's two-wheeler exports increasing by 21% year-on-year in the past 12 months. However, Bajaj's volume share in India's two-wheeler exports has declined from 62% in FY15 to 40% in FY25. Latin America has emerged as the largest export region for Bajaj, with other geographies remaining steady. The company expects 15-20% growth in exports for FY26, the brokerage highlighted.

"Bajaj said that it could face slight margin pressure in the near term as recent price hikes have only partly passed on the cost impact of commodities and OBD-2 regulation; Rupee strength versus US dollar is also a headwind. Bajaj was also concerned about rare earth export restrictions from China and said industry production could be affected starting in July," the brokerage said.

Jefferies has fine-tuned its estimates, projecting an 11% volume and 13% EPS compound annual growth from FY25 to FY28. Despite the positive outlook, Bajaj Auto's valuation at 26 times the projected earnings per share for fiscal 2026 is considered high, leading to a 'hold' rating with a revised price target of Rs 8,000 per share.

The brokerage prefers TVS Motor Co. and Eicher Motors in the two-wheeler segment.