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Maharashtra Halts Permits, Stock Drops
Bajaj Auto Ltd. shares declined about 2% on Wednesday, extending recent losses. The drop followed a critical note from brokerage firm UBS and a regulatory development where the Maharashtra government announced a temporary pause on new auto-rickshaw permits. This action is described as a shift from expansion to managing "saturation."
High-Margin Three-Wheeler Business Faces Risk
This policy shift directly impacts Bajaj Auto, which holds a commanding 87% market share in Maharashtra for internal combustion engine (ICE) three-wheelers. UBS noted that this segment offers margins exceeding 30%. Maharashtra represents 17% of the company's domestic ICE three-wheeler volumes and 15% of its overall three-wheeler volumes, making the state's regulatory actions a significant factor for the company's profitability.
UBS Maintains Sell Rating Amid Uncertainty
UBS has reiterated its "sell" rating on Bajaj Auto, setting a price target of ₹9,015, which suggests a potential 6% downside from recent closing prices. The firm's analysis highlights the increased risk to Bajaj Auto's earnings due to its strong position in the state's key three-wheeler market. While the broader analyst community shows mixed sentiment, with 27 out of 46 analysts recommending "buy," the recent regulatory actions and UBS's cautious stance are influencing investor sentiment. Bajaj Auto's stock has already decreased by 4.5% over the past month.