Bajaj Auto shares jump most in over two years after multiple brokerage upgrades

Many analysts who track Bajaj Auto have either upgraded their ratings or raised their price targets on the two-wheeler maker, citing various factors, including attractive valuations. Shares of Bajaj Auto have gained 7 percent over the last 12 months and only 15 percent in the last five years.

The upgrades come after Bajaj Auto delivered a strong earnings in the December quarter, where EBITDA margin reached the highest in 17 quarters. Earnings were strong despite exports facing headwinds.

EBITDA per vehicle also rose 18 percent on a sequential basis to an all-time high.

Out of the 52 analysts that track Bajaj Auto, 33 have a buy recommendation, 15 say hold, while four have a sell recommendation.

has upgraded the stock to overweight and also raised its price target to Rs 4,400. The brokerage believes that the core business for the company has mostly bottomed and that their rising focus on EVs is a positive.

A strong earnings beat despite weak volumes, increasing aggression on EVs indicating a launch of three-wheeler EVs as well as a ramp-up in two-wheeler EV volumes and a potential bottoming of exports are cited by JPMorgan as the factors behind their upgrade.

The brokerage also finds Bajaj Auto's current valuations as attractive and is reflecting a favourable risk-reward. It has raised Bajaj Auto's earnings per share estimate by 8-13 percent between financial year 2023-2025.

Morgan Stanley has a contrarian overweight rating on Bajaj Auto. The firm believes that the slowdown in exports and domestic two-wheelers is priced-in and valuations are attractive. It believes that launches of Electric Vehicles and a successful launch of the premium cruiser will drive a re-rating. The brokerage has raised its price target on the stock to Rs 4,449 from Rs 4,258 earlier.

CLSA believes that low raw material costs, better forex realisations and a richer product mix contributed to Bajaj Auto's December quarter earnings beat. It has raised its earnings assumptions for Bajaj Auto by 14-15 percent for financial year 2024 and 2025 to factor in higher revenue and margin. Price target has also been raised to Rs 4,619.

Jefferies believes that domestic two-wheelers are ripe for recovery from an "abnormal cyclical trough." Although exports are facing macro pressures, Bajaj expects this to improve by Mid-2023. The brokerage has maintained its buy rating on the stock with a price target of Rs 4,300.

However, Kotak Institutional Equities has maintained a reduce rating on Bajaj Auto with a price target of Rs 3,625. The brokerage believes that even as Bajaj Auto's profitability improves, two-wheeler demand in both domestic and export markets remains under pressure. Increasing cost of ownership, inflationary pressures in emerging geographies, and weak rural demand remain areas of concern for Bajaj Auto, according to the note.

Shares of Bajaj Auto are trading 6 percent higher at Rs 3,943. The two-wheeler maker along with Tata Motors are the top gainers on the Nifty 50 index.