Bajaj Auto zooms 5% to hit new high, tops Rs 5000 on BofA's double-upgrade

Thus far in the calendar year 2023, the stock price of Bajaj Auto has appreciated by 41%, as compared to a 10.7% rise in the S&P BSE Sensex and a 27.7 per cent surge in the S&P BSE Auto index

Shares of Bajaj Auto scaled a record high, crossing Rs 5,000-mark on the BSE in Friday’s intra-day trade after global brokerage BofA Securities upgraded the stock to "buy" from "neutral" and raised the 12-month target price to Rs 5,550 from Rs 5,100.

The stock of the automobile company surged 5 per cent to Rs 5,084.90, surpassing its previous high of Rs 4,988.55 touched on July 13, 2023.

According to a CNBC-TV18 report, BofA Securities believes that all the business segments of Bajaj Auto are well set for positive growth in the financial year 2025 (FY25). 

It expects the company's revenue to see a 14-15 per cent compounded annual growth rate (CAGR) over FY23–26.

The business model is quite well positioned, with both cyclical and structural drivers at play. The company's exports finally seem to be inflecting, reports further cited the note as saying. 

Thus far in the calendar year 2023, the stock price of Bajaj Auto has appreciated by 41 per cent. In comparison, the S&P BSE Sensex has gained 10.7 per cent and the S&P BSE Auto index jumped 27.7 per cent during this period.

Meanwhile, according to analysts at Axis Securities, Bajaj Auto’s focus on the 125cc+ segment is in line with the changing industry dynamics, where the share of commuter motorcycles is declining (60 per cent of total domestic sales in FY16, coming down to 50 per cent in FY23).

The company through its exclusive dealership networks for KTM, Bajaj Motorcycles, Chetak Electric, and 3-wheelers offers differentiated customer experience and preserves brand value, they said.

"The recent Triumph launch will also be marketed through the exclusive Triumph network, and we expect it to plug the gap in the portfolio. The company has robust domestic IC engine franchise, however, export pickup, and establishing market share through successful EV-2W/3W launches will be the key monitorable for the stock," it added, while mantaining a buy rating with a target price of Rs 5,400.

In the domestic 2-wheeler market, Bajaj Auto is growing strongly and gaining a share in the 125cc+ segment, which is enhancing profitability. The domestic 3-wheeler sales are now beyond covid levels and Bajaj Auto is seeing share gains here as well. Exports have bottomed out and are expected to see better and better volumes sequentially, said analysts at KRChoksey Shares and Securities.

Bajaj Auto will benefit from replenishing the depleted export channel inventory. The new products, namely Chetak, electric 3-wheelers and Triumph are seeing a build-up in momentum, the brokerage said.

It expects EBITDA margins to be largely range-bound as the benefit from lower commodity costs and operating leverage will be neutralized by an unfavourable mix on account of rising exports and sales of Chetak.