Check out: How brokerages rate Bajaj Auto after co enters into JV with UK's Triumph

Motilal Oswal has maintained a buy on 2-wheeler manufacturer Bajaj Auto with an upside potential of 13 percent for target price of Rs 3,281, after the company declared a partnership with UK’s Triumph Motorcycles aiming to develop a range of mid-capacity (250-750cc) motorcycles. The partnership will focus on entering new higher-volume market segments, especially in emerging markets. The size of the mid-capacity segment (250-750cc) is estimated at 1 million motorcycles annually. Since Bajaj Auto has limited presence in this segment, and thus, should benefit from Triumph’s association.

Bajaj Auto will sell its products in global markets like Africa and part of ASEAN/Latin American countries. Triumph is expected to sell products in other markets. The research firm believes that this partnership will leverage on strengths of both the players – Triumph’s brand position/perception and design & development technology, and Bajaj Auto's quality/cost competitiveness and worldwide distribution. Bajaj Auto will manufacture Triumph motorcycles at its Chakan facility (existing or new plant). It also indicated that a plant might have to be added for both Triumph and Husqvarna.

Motilal Oswal believes that worst of volumes and margins for Bajaj Auto is reflected in Q1 FY'18, with recovery expected in volumes in domestic and export markets from H2 FY'18.

Brokerage: Credit Suisse | Rating: Neutral | Target: Rs 2,590

Global research firm Credit Suisse has a neutral rating on Bajaj Auto with a target price of Rs 2,590. However, it has an underweight weight on the sector as a whole. Credit Suisse believes that the non-equity partnership of Bajaj Auto with Triumph Motorcycles for mid-capacity bikes is to make in India and sold globally with the idea to replicate the success that Bajaj has had with KTM. Bajaj has a good positioning on sports and street bikes. In Husqvarna, it has a tie-up in place for adventure bikes, it said.

The idea is to leverage the strength of the Triumph brand and low-cost engineering capabilities of Bajaj to produce mid-capacity bikes focused on emerging markets. The main focus area is India, but Bajaj will also be responsible for selling Triumph bikes in certain Latin America, African and ASEAN markets, the research firm said.