Bajaj Auto scales all time high as Q3 beats estimates: Should you buy, sell, or hold the stock?

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Shares of Bajaj Auto surged over 5 percent to hit its all-time high on January 25, extending the previous day's gains, after the two-wheeler major reported record high revenue and net profit for the third straight quarter. The stock closed at Rs 7,590 in the session.

Brokerages have a mixed outlook on the stock, citing optimism over electrification, improving product mix and sales rebound, among other factors, but concerns over rising competition linger.

Earlier, on January 24, the Bajaj Auto stock rose 1.55 percent to end at Rs 7,206 ahead of results. It has gained over 42 percent since October.

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Brokerage ratings and target prices

Morgan Stanley has an 'overweight' call on Bajaj Auto with a target price of Rs 8,082 per share, implying an upside potential of about 12 percent from the previous closing price. Analysts at the firm said that October-December was a strong quarter and that improving product mix supported gross margin and EBITDA.

Also read: Bajaj Auto Q3FY24 net profit up 37% YoY at Rs 2,042 crore on robust sales, price hikes

Jefferies has a 'buy' rating on Bajaj Auto with a target price of Rs 9,000, implying an upside of nearly 25 percent. The firm said that the two-wheeler segment of the company is poised for a rebound, anticipating a 15 percent volume CAGR in FY24-26. Further, Bajaj Auto's increased focus on electrification with a market share of 13 percent bodes well. "The three-wheeler segment is also getting a good reception," said the brokerage.

However, Citi has a 'sell' rating on the stock, with a target price of Rs 5,000, implying a downside of about 31 percent. The brokerage believes that the competitive intensity in the motorcycle space is high, and export revival could be long drawn.

Robust Q3 results

During the fiscal third quarter, the Triumph-maker reported a 37 percent year-on-year (YoY) increase in net profit for the third quarter Rs 2,041.88 crore driven by robust sales of its two-wheelers, price hikes and higher realisations amid consistent demand.

Benefiting from a more favourable product mix with an emphasis on premium vehicles, the Pune-based automaker witnessed a 30 percent increase in revenue, reaching Rs 12,113.51 crore in the October-December period. In comparison, the turnover during Q3FY23 amounted to Rs 9,315 crore.

Bajaj Auto stated that its margin increased further to 20.1 percent, up by +100 bps YoY. This improvement was attributed to better realisations, dynamic cost management, and operating leverage, which more than offset the impact of competitive investments in electric scooters.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.