Bajaj Auto shares plunge 11% post Q2 results; here's why

Shares of Bajaj Auto Ltd took a beating on Thursday morning after less-than-expected September quarter results. A weak product mix drove Q2 margin miss, analysts said while citing a muted start to the festive season. The risk-reward on the counter also looks unfavourable following the recent rally, they said.

Emkay Global has downgraded the Bajaj Auto stock to 'Sell' from 'Reduce', with new target price of Rs 9,500. It prefers Hero MotoCorp due to better risk-reward and TVS Motor Ltd due to improved growth prospects.

Bajaj Auto's revenue for the quarter increased 22 per cent YoY, slightly lower than Nuvama's estimates, owing to lower-than-expected realisation. Volume grew 16 per cent to 12 lakh units, while net revenue per unit grew 5 per cent at Rs 1,07,470 per unit.

"Ebitda surged 24 per cent to Rs 2,650 crore (our estimate: Rs 2,730 crore), slightly below estimate due to revenue miss. Ebitda margin expanded 40 bps YoY to 20.2 per cent. All in all, adjusted PAT shot up 22 per cent YoY to Rs 2,220 crore (our estimate: Rs 2,270 crore), slightly below estimate owing to lower operating profit," Nuvama said.

Bajaj Auto shares plunged 10.69 per cent to hit a low of Rs 10,380 on BSE. Despite this, the stock is up 55 per cent year-to-date.

Bajaj Auto has outperformed the Nifty Auto index over the last 12 months, fuelled by market share gains in the 125cc+ domestic motorcycle segment, improved margins, and a unique shareholder reward policy.

"However, the stock now trades at 38.5 times/30 times FY25E/26E EPS and appears fairly valued. We maintain our Neutral rating with a target price of Rs 11,450, based on 26x September 2026 consolidated EPS," MOFSL said.Nuvama suggested a revised target price of Rs 13,200 from Rs 12,000 earlier.

Despite a tax hit of Rs. 211 crores, the company’s PAT stood healthy, albeit it had some impact on its margin, said Sagar Shetty, Research Analyst at StoxBox.

"On the CV segment, the company was able to clock another record high in terms of volume and subsequent revenue. On the E2W and E3W front, the company has successfully captured a healthy market share aided by sharp execution of strategy on the product and distribution front. Going ahead, the company is well-positioned to benefit from the emerging segment opportunity, largely based on its diverse product offering," Shetty said.

The management’s comment on its capacity expansion and positioning of its CNG 2W would be key aspects to look at, he said.