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Motilal Oswal Report
Bajaj Auto Ltd.'s Q2 FY25 performance was in line with our estimates. Ebitda margin remained stable QoQ at 20.2% as the impact of an adverse mix and raw material inflation was offset by price hikes, favorable forex rates, and operating leverage benefits.
However, the festive season has started on a weak note, with the industry posting just 1-2% YoY growth as of Dussehra and expecting 3-5% YoY growth during the season, assuming a revival before Diwali. The outlook for its key export market, Africa, remains uncertain, though the margin outlook is improving.
Bajaj Auto has outperformed the Nifty Auto Index over the last 12 months, fueled by market share gains in the 125cc+ domestic motorcycle segment, improved margins, and a unique shareholder reward policy. However, the stock now trades at ~38.5 times/30 times FY25E/26E EPS and appears fairly valued.
We maintain our Neutral rating with a target price of Rs 11,450, based on 26 times Sep'26E consolidated earnings per share.
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