On October 17, 2024, Bajaj Auto’s stock plummeted by 10% to ₹10,414 after the company’s second-quarter results for FY2024-25 fell short of market expectations. Despite a 9% rise in standalone net profit, reaching ₹2,005 crore (up from ₹1,836 crore the previous year), and a 22% increase in revenue to ₹13,127 crore (from ₹10,777 crore), the market reacted negatively. Investors were disappointed by the company’s profit margins and its revised growth outlook for two-wheeler sales in India. Bajaj Auto now expects only 5% growth in domestic two-wheeler sales, the lower end of its previous 5-8% projection, dampening investor confidence.
Analysts offered mixed reactions to the results. Citi issued a ‘sell’ recommendation, setting a target price of ₹7,800, which represents a 33% downside from the last closing price of ₹11,616. Citi cited lower-than-expected average selling prices (ASPs) and profit margins, along with muted expectations for the upcoming festive season, despite a 12% year-on-year rise in two-wheeler registrations according to Vahan data.
Macquarie, on the other hand, maintained a neutral stance with a target price of ₹11,200. While the Q2 results were largely in line with their forecasts, the brokerage expressed disappointment over lower gross margins due to a higher share of new products in the sales mix. They also cautioned that festive demand might be softer than initially anticipated.
Meanwhile, other analysts remain optimistic about Bajaj Auto’s future prospects. HSBC issued a bullish recommendation with a target price of ₹14,000, emphasizing Bajaj Auto’s 30% market share in the electric three-wheeler (e-3W) segment, where EV penetration has already reached 20%. HSBC also pointed to the company’s potential to capitalize on the formalization of the e-rickshaw market.
Jefferies also recommended a ‘buy,’ highlighting Bajaj Auto’s growing presence in the electric two-wheeler (e-2W) market and plans to ramp up production of CNG bikes. The brokerage projects a 14% compound annual growth rate (CAGR) in volumes from FY24 to FY27, driven by increasing two-wheeler demand in India and a cyclical recovery in exports. They also noted the company’s plans to expand its production capacity in Brazil.
Morgan Stanley, which has an ‘overweight’ rating on Bajaj Auto, praised the company for its focus on maintaining margins amid challenges from the growing electric vehicle market. However, they warned that the rise of EVs could affect the company’s product mix. Despite this, Morgan Stanley remains optimistic about Bajaj Auto’s export markets, especially in Latin America, where the company saw 20% year-on-year growth. The company plans to boost production at its Brazilian plant, with an investment of ₹84 crore to increase capacity from 20,000 to 35,000 units annually by 2024. While challenges persist in African markets, Bajaj Auto expects better export performance in the third quarter of FY2024-25.
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The information provided in this article is for general informational purposes only and does not constitute financial, investment, or trading advice. While efforts are made to ensure the accuracy of the data presented, market conditions can change rapidly, and past performance does not guarantee future results. Readers are advised to conduct their own research or consult with a professional financial advisor before making any investment decisions. Neither the author nor the publisher shall be held liable for any losses or damages arising from the use of this information.
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