On Thursday, Ambit Capital initiated coverage on Bajaj Auto Ltd (BJAUT:IN) with a sell rating and a price target of INR 9,652. The firm acknowledged Bajaj Auto's successful strategies in the Indian market over the last two to three years, which have seen the company capitalize on the trend of premium motorcycles, benefit from a shift to CNG in three-wheelers, and find reasonable success in the electric scooter segment.
Bajaj Auto's recent and forthcoming product launches are expected to significantly expand its market and potential earnings before interest, taxes, depreciation, and amortization (EBITDA), with estimates suggesting a 2.5-fold increase in addressable market and a 3.2-fold rise in EBITDA pool. Additionally, the company's exports are on the upswing in most markets, and there has been an improvement in the mix of two-wheeler exports.
Despite these positive developments, Ambit Capital has taken a cautious stance on the stock due to the challenges ahead. The company is encouraged to transition its dominance in domestic three-wheelers and mid-range motorcycles to the electric vehicle (EV) sector. The sell rating is based on a discounted cash flow (DCF) analysis, which leads to a fair value estimate that implies a price-to-earnings (P/E) ratio of 28.3 times for March 2026.
The analysis by Ambit Capital suggests that while Bajaj Auto has made significant progress, there is a preference for Eicher Motors (EIM) over Bajaj Auto, citing a more favorable risk-reward balance. This strategic outlook on Bajaj Auto's stock reflects the firm's assessment of the current market conditions and the company's future prospects in the evolving automotive industry.
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