LKP neutral on Bajaj Auto; target of Rs 2525

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26 Aug, 2025 12:21

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LKP's report on Bajaj Auto

"Bajaj's domestic sales may grow on the early positive response to Discover 150 but may find it difficult to maintain the momentum considering the competitive scenario building up. Concerns of cannibalization within the same brand of Discover may continue and not help a strong growth to arise. With continuation of strong competition and discounting / subvention schems from rivals continuing , we expect a subdued performance from motorcycles going forward. 3W were the bright spot in the quarter growing close to 40%. This was possible due to growth in domestic markets mainly due to the permits in Maharashtra getting opened and diesel based 3W showing a good traction. Exports markets are showing a strong traction with Egypt and Sri Lanka leading to a recovery. New markets like Iran, Angola, Ghana, Phillipines have performed very well in Q2, thus giving us hopes that it may continue to do so henceforth. We do not expect great benefits for the company from currency movement as stable government at centre has already started showing rupee appreciation."

"Also marketing spend associated with the new launches of the low margin Discover models may somewhat offset the impact of strong 3W and exports. We have increased our volume expectations mainly on the exports considering the strong growth in Q2 and expectations of strong domestic 3W business. Also, we have increased the domestic motorcycle business estimate slightly to factor in the new launch success though on a smaller scale. Though the rupee appreciation may limit margins from hereon, a slight expansion can't be ruled out given the traction in 3W and exports and meaningful impact of permits from Maharashtra yet to be witnessed. We arrive at a core business value of Rs 2,434, to which we add subsidiaries value of Rs 86 from KTM and Rs 5 from Indonesian subsidiary. From current levels, however, we do not see a significant upside post the recent rally in the stock and hence have a NEUTRAL rating on the stock. (TP 2525)", says LKP research report.

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