Fri Oct 18 01:55:28 UTC 2024: ## Bajaj Auto Shares Plunge 12% as Festive Season Outlook Dims

**MUMBAI** – Shares of Bajaj Auto took a sharp dive on Thursday, plummeting over 12% on the National Stock Exchange, after the company issued a muted outlook for festive season sales. While the company reported a 9% jump in net profit to Rs 2,005 crore in the second quarter of fiscal year 2025, a projected 1-2% growth in motorcycle sales for the upcoming October-November festive period disappointed investors.

This figure falls significantly short of the industry’s earlier estimates, which predicted a 5-6% growth during the crucial sales period.

Analysts pointed to rising commodity prices, particularly for copper, aluminum, rubber, and precious metals, as another factor contributing to the decline. Although Bajaj Auto offset some of the cost pressures through price hikes and operational improvements, the impact on margins remained a concern.

Despite the subdued outlook, Bajaj Auto’s revenue surged by nearly 22% to Rs 13,127 crore compared to the same period last year. However, the export picture remains unclear, with export volumes in major markets remaining flat.

While exports to Latin America grew by 20%, volumes in Asia remained unchanged, and a 9% decline was witnessed in Africa, primarily in Nigeria.

Analysts expect a clearer picture of the export situation in the coming quarter, with a projected compound annual growth rate (CAGR) of 15.3% for EBITDA from fiscal year 2024 to fiscal year 2027E. This growth is predicated on a recovery in exports and stronger domestic sales.

However, several risks remain, including the possibility of a delayed export recovery, heightened competition in the electric two-wheeler market, and potential further increases in raw material costs.

Despite the recent dip, Bajaj Auto’s shares have delivered over 53% returns on a year-to-date basis, largely fueled by gains in the 125cc+ domestic motorcycle market, improved margins, and a unique shareholder reward policy.

However, the stock is now trading at 38.5x/30x FY25E/26E EPS, considered fairly valued by several analysts. Motilal Oswal Financial Services maintains a Neutral rating with a target price of Rs 11,450, while Axis Securities maintains a ‘hold’ rating with a target price of Rs 11,950, reflecting a mere 3% upside from the current market level.

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