Bajaj Auto's Q1 FY26 earnings at Rs 20.6 billion beats Motilal Oswal's estimate of Rs 19.8 billion, aided by higher-than-expected other income even as margins were in line with our estimate at 19.7%. Margin has fallen below 20% for the first time in seven quarters.
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Motilal Oswal Report
While a recovery in exports and a healthy ramp-up of Chetak and three-wheelers are key positives, Bajaj Auto Ltd.'s market share loss in domestic motorcycles, that too in its bread-and butter 125cc+ segment, remains the key concern.
Further, the ramp-up of its CNG bike, Freedom, has been slower than expected. While Bajaj Auto has acquired a controlling stake in KTM under a lucrative deal, its effectiveness depends on how quickly it is able to turn around its operations, which will remain the key monitorable from hereon.
At ~25.4x/22.7x FY26E/27E EPS, Bajaj Auto appears fairly valued.
We maintain a Neutral rating with a target price of Rs 8,618, based on 22x June-27E core EPS.
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