Bajaj Auto's Q2 FY26 earnings at Rs 24.8 billion were broadly in line with the brokerage's estimate. While margins were 50bp ahead of expectations at 20.5%, led by an improved mix and favorable currency, lower other income limited earnings upside.
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While a recovery in exports and a healthy ramp-up of Chetak and three-wheelers are key positives, market share losses in domestic motorcycles, particularly in its crucial 125cc+ segment, remains the key concern.
While Bajaj Auto Ltd. 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 a key monitorable moving forward.
At ~25.7x/23.5x FY26E/27E EPS, Bajaj Auto appears fairly valued. We reiterate a Neutral rating with a target price of Rs 9,070, based on 24x Sep27E core EPS.
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