On Thursday, Jefferies maintained a positive outlook on Bajaj Auto Ltd (BJAUT:IN), raising the price target from INR 11,630 to INR 13,400 and reaffirming a Buy rating. This update follows Bajaj Auto’s performance in the second quarter, which revealed a year-over-year increase of 21-24% in EBITDA and recurring profit after tax (PAT), although it slightly missed Jefferies’ forecasts by 3-4%.
The analyst observed that Bajaj Auto expects a moderate 3-5% growth in motorcycle sales during the festive season while remaining optimistic about the prospect of continued quarter-over-quarter improvement in exports.
Jefferies forecasts a strong growth path for Bajaj Auto, anticipating a 14% compound annual growth rate (CAGR) in volumes between fiscal years 2024 to 2027. This growth is expected to be driven by rising demand for two-wheelers in India and a cyclical recovery in exports.
Bajaj Auto is also making noteworthy progress in the electric two-wheeler (E2W) sector by increasing its market share and enhancing the production of CNG-powered bikes. Additionally, the company is expanding its operational capabilities in Brazil.
Despite these positive developments, Jefferies has slightly reduced its earnings per share (EPS) estimates for fiscal years 2025 to 2027 by 1-2%, yet continues to maintain a Buy recommendation for the stock.
InvestingPro Insights
Complementing Jefferies’ favorable outlook on Bajaj Auto Ltd, recent data from InvestingPro provides additional context regarding the company’s financial performance and market standing. Bajaj Auto’s market capitalization is $38.68 billion, indicating its substantial presence in the automotive sector.
The company has achieved a revenue growth of 20.43% over the past twelve months as of Q1 2025, aligning with Jefferies’ expectations of robust growth. This strong performance is further emphasized by an impressive EBITDA growth of 31.05% over the same period, reflecting enhanced operational efficiency.
InvestingPro Tips underline Bajaj Auto’s financial robustness and market performance. The company’s balance sheet shows more cash than debt, indicating a strong financial position that could support its expansion plans in the E2W segment and the Brazilian market. Furthermore, Bajaj Auto has consistently paid dividends for 17 years, potentially attracting income-oriented investors.
The stock has performed exceptionally well, with a 96.83% total return over the past year and a 51.01% return year-to-date. This aligns with Jefferies’ optimistic stance and increased price target.
However, it is important for investors to be aware that Bajaj Auto is trading at a P/E ratio of 38.87, which InvestingPro Tips suggest is high compared to near-term earnings growth. This valuation metric indicates that the market may have already factored in significant growth expectations.
For those interested in a more in-depth analysis, InvestingPro offers 15 additional tips for Bajaj Auto, providing a deeper insight into the company’s financial health and market position.
