Bajaj Freedom 125: Can CNG bike launch lift Bajaj Auto, IGL, MGL, Gujarat Gas shares? Here are price targets

As Bajaj Auto Ltd unveiled the world's first CNG bike Bajaj Freedom 125, analysts believe the model should see volumes of 10,000 units per month in the second half of FY25 and 20,000 units per month in FY26. The CNG model should offer better cost of ownership in comparison to petrol motorcycles and can attract cost-conscious customers, they said as they see powertrain getting adapted for multiple engine displacements ahead. 

This should increase CNG demand in the medium term, as Bajaj Auto launches CNG models in the 100cc and 110cc segments and other two-wheeler OEMs play a catch up. Nuvama has upped its target prices for Mahanagar Gas Ltd, Indraprastha Gas Ltd and Gujarat Gas Ltd by 9-17 per cent and retained 'Buy' on all three, in the pecking order of MGL, Gujarat Gas and IGL. It also increased its target price for Bajaj Auto.  Bajaj Auto is the top two-wheeler pick for foreign brokerage Nomura India.   

"We continue to acknowledge Bajaj Auto's innovative approach across segments. The company could have a headstart of 2-3 years over its competition if its CNG bikes start gaining market share. Similarly, we remain optimistic on the company's 2W EV potential, too, which can ramp up much more this year in our view. We maintain Bajaj Auto as our top 2W pick," Nomura India said.

Bajaj Freedom 125 will be available at ex-showroom price of nearly Rs 95,000. This compares with peers Super Splendor and Shine 125, which have starting model price at Rs 80,848 and Rs 79,800, respectively. For now, the Bajaj Auto management expects total market at around 6,00,000 units, with CNG availability at 60 per cent, making the total addressable market at 3,60,000 units. 

"We estimate CNG mobike total cost of ownership to be 28-30 per cent lower than EVs primarily on higher initial costs versus CNG mobikes and, hence, payback period for electric MCs at a tall ask of 3.6–7.4 years. “Freedom” has a certified mileage of 102km/kg but we retain conservative assumption of 80km/kg to factor in non-optimal driving conditions. Our base case estimates 1–2 per cent growth in FY26E and 5–13 per cent uptick in incremental CNG volume by 2030," Nuvama said. 

Nuvama has a revised target price of Rs 1,957 on MGL, suggesting a 15 per cent upside potential. It suggested a new target of Rs 598 on IGL, suggesting 14 per cent potential upside. Nuvama's Gujarat Gas target price of Rs 740 hints at 15 per cent upside ahead.

"Even sans considering incremental volume from CNG MCs, managements of all three CGDs have guided for 6–12 per cent YoY volume growth in FY25 led by double-digit I/C growth (MGL, IGL) and CNG growth (GGL). We raise TP for MGL, IGL, GGL by 9–17 epr cent as we incorporate higher CNG volume from FY26 onwards. We cut capex for GGL as it plans to commission CNG stations via its FDODO scheme. We cut FY25E/26E Ebitda by 1–20 per cent for MGL, GGL and raise it by 2–4 per cent for IGL as we rationalise near-term margins," it said.

For Bajaj Auto, Nuvama expects revenue and Ebitda CAGR of 12 per cent and 15 per cent over FY24–26, with average return on equity of 35 per cent. "All in all, we maintain ‘BUY’ with a target price of Rs 12,000 (earlier Rs 10,340) based on 35 times Sep-26E core earnings along with cash/investments of Rs 876 per share," it said.

MOFSL said the stock has already witnessed the significant rerating in the last 12 months on the back of its market share gains in 125cc+ domestic motorcycles, improved margins and a one-of-a-kind policy to reward shareholders. 

"After a recent rally, the valuation now at 29 times FY25E EPS appears reasonable. "We reiterate our Neutral rating with a price target of Rs 8,660 (premised on 22 times June-26E consolidated EPS," it said.