On Thursday, Jefferies maintained a positive stance on Bajaj Auto Ltd (BJAUT:IN), increasing the price target to INR 13,400 from INR 11,630, while reaffirming a Buy rating on the shares. The adjustment follows Bajaj Auto's second-quarter performance, which showed a year-over-year increase of 21-24% in EBITDA and recurring profit after tax (PAT), albeit slightly missing Jefferies' forecasts by 3-4%.
The analyst noted that Bajaj Auto anticipates a modest 3-5% growth in motorcycle sales during the festive season but remains confident about the potential for continued quarter-over-quarter improvement in exports.
Jefferies predicts a robust growth trajectory for Bajaj Auto, expecting a 14% compound annual growth rate (CAGR) in volumes from the fiscal year 2024 to 2027, driven by rising demand for two-wheelers in India and a cyclical recovery in exports.
Bajaj Auto is also making significant strides in the electric two-wheeler (E2W) segment, increasing its market share, and is actively boosting the production of CNG-powered bikes. Furthermore, the company is expanding its operational capacity in Brazil.
Despite these positive developments, Jefferies has slightly reduced its earnings per share (EPS) estimates for the fiscal years 2025 to 2027 by 1-2%, but still retains a Buy recommendation for the stock.
InvestingPro Insights
To complement Jefferies' positive outlook on Bajaj Auto Ltd, recent data from InvestingPro provides additional context to the company's financial performance and market position. Bajaj Auto's market capitalization stands at $38.68 billion, reflecting its significant presence in the automotive industry.
The company's revenue growth of 20.43% over the last twelve months as of Q1 2025 aligns with Jefferies' projection of robust growth. This strong performance is further underscored by an impressive EBITDA growth of 31.05% over the same period, indicating improved operational efficiency.
InvestingPro Tips highlight Bajaj Auto's financial strength and market performance. The company holds more cash than debt on its balance sheet, suggesting a solid financial position that could support its expansion plans in the E2W segment and Brazilian market. Additionally, Bajaj Auto has maintained dividend payments for 17 consecutive years, which may appeal to income-focused investors.
The stock's performance has been particularly strong, with a 96.83% total return over the past year and a 51.01% return year-to-date. This aligns with Jefferies' bullish stance and increased price target.
However, investors should note that Bajaj Auto is trading at a P/E ratio of 38.87, which InvestingPro Tips indicate is high relative to near-term earnings growth. This valuation metric suggests that the market has already priced in significant growth expectations.
For readers interested in a more comprehensive analysis, InvestingPro offers 15 additional tips for Bajaj Auto, providing a deeper understanding of the company's financial health and market position.
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