Brokerage firm Motilal Oswal has maintained a positive view on Bajaj Auto, setting a target price of ₹12,600 per share. The company reported a 35% year-on-year rise in profit to ₹33.5 billion for the second quarter of fiscal year 2027. Investors are monitoring the company’s ability to protect margins amidst rising raw material costs and intense competition in the two-wheeler sector.
Motilal Oswal has released a research update on Bajaj Auto, maintaining a positive outlook with a target price of ₹12,600 per share. This follows the company’s performance in the second quarter of the 2027 fiscal year, where it reported a profit after tax of ₹33.5 billion. This marks a 35% increase compared to the same period last year, a result that outperformed general analyst expectations.
Margin Stability and Operational Performance
During the quarter, Bajaj Auto successfully kept its operating margins stable at 20.9% on a quarter-on-quarter basis. This stability is notable because the company is operating in an environment of rising raw material costs, particularly steel and aluminum, which typically squeeze profits for automotive manufacturers. To combat these costs, the company implemented strategic price adjustments, benefited from favorable currency movements in its export markets, and shifted its focus toward higher-value export products.
Valuation and Market Context
The brokerage report notes that Bajaj Auto is trading at approximately 21.8 times its estimated earnings for fiscal year 2027 and 18.9 times for fiscal year 2028. This valuation is seen as reasonable given the company’s history of strong return ratios and consistent dividend payouts. Unlike some peers that have struggled to balance volume growth with profitability, Bajaj Auto has maintained a focus on product mix to support its margins.
Risks and Monitorables
While the financial results appear robust, investors should consider several factors that could influence future performance. The automotive sector faces significant challenges from commodity price volatility and shifting demand patterns. If raw material prices continue to climb, maintaining the 20.9% margin level could become difficult without further price hikes, which might impact sales volume.
Furthermore, Bajaj Auto faces intense competition in the electric two-wheeler market, where domestic competitors like TVS Motor Company and various newer electric-focused startups are aggressively capturing market share. The success of the Chetak electric scooter lineup remains a key business metric. Additionally, the company’s heavy reliance on international markets, such as Latin America and Africa, exposes it to currency fluctuations and geopolitical risks in those regions. Investors may watch the company's export volume data and its ability to gain ground in the electric vehicle segment in the coming quarters to understand the sustainability of its growth trajectory.