Bajaj Auto shares expensive? Sell on rise, stock pricing in near-term positives, says SMIFS

SMIFS Limited in its latest note on Bajaj Auto Ltd said the stock is trading at an expensive valuation of 18.9 times estimated FY26 earnings per share of Rs 370. It recommended a 'sell on rise'  on the stock, saying most of the near-term triggers for Bajaj Auto look priced-in. The brokerage has downgraded the auto stock to 'sell' from 'accumulate' and suggested a share price target of Rs 6,490.

SMIFS said Bajaj Auto has a huge cash surplus of Rs 17,330 crore as on September 30, 2023. On the share buyback announcement, SMIFS said the last buyback announced by Bajaj Auto was in June 2022 at a price of Rs 4,000 per share for a total consideration of Rs 2,500 crore. This, it noted, was 11 per cent of Bajaj Auto’s September 2022 net worth.  The 43 per cent premium this time is very positive for the stock, but the stock is trading expensive, the broking firm said.

Read more: Bajaj Auto share buyback: What retail investors need to know about Rs 4,000 crore offer

"We have broadly kept FY24 EPS at near similar level, upgraded EPS for FY25/FY26 marginally by 2 per cent/3 per cent respectively owing to minor tweaks in estimates. Bajaj should be able to keep Ebitda margin near 19.5-20 per cent levels due to the combination of Triumph, recovery in exports and continued traction in domestic sales," it said.

The brokerage has rolled over its estimates to March 2026 from September 2025. It valued standalone business at 16 times March 2026 EPS of Rs 370, KTM at Rs 203 per share and Chetak at Rs 362 per share (3 times FY26 revenue).

The brokerage expects volumes for Bajaj Auto to grow at 12 per cent, revenue at 20 per cent, Ebitda at 25 per cent and PAT at 23 per cent, respectively, compounded annually over FY23-FY26e Volumes will be driven by recovery in exports, continued strong momentum in 2W domestic, this is followed by ramp- up in Chetak and Triumph models, it said.

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