Bajaj Auto is down sharply in trade today. In fact, it is one of the key losers on the benchmark one of the big losers in the list of auto stocks as well. The share price of Bajaj Auto is down 2.5% and hit an intra-day low of Rs 8,616 per share. The two-wheeler major reported its Q4 earnings yesterday. While margins were stable and recovery in exports and a healthy ramp-up of Chetak and three-wheelers are key positives, the street is worried about the loss in domestic market share, especially in the volume-heavy 125cc segment.
What’s the big worry for Bajaj Auto now?
Volatility in commodity costs and currency fluctuation is also seen as key risks to Bajaj Auto’s earnings trajectory in forthcoming quarters. Supply curbs from China on rare earth metals remain a lingering concern as well.
Here is a quick analysis of the key worries for Bajaj Auto at the moment –
Loss in 125cc domestic two-wheeler market share
Bajaj Auto has lost significant market share in the domestic two-wheeler space. Its top sellers like the Platina and the Pulsar have seen sharp drop in market share in March. On a year-on-year comparison, Bajaj Pulsar 125cc saw nearly 8% contraction in sales while Bajaj Platina sales dropped 3%. The ramp-up of the much-hyped CNG bike also remained a big concern. It’s been slower than what was initially expected.
According to the Bajaj Auto management, “they aim to recover lost market share in the 125cc+ segment on the back of new launches and “would target to get closer to the market leader in this segment by the end of FY26”
Rare earth metal supply curbs
Another key headwind outlines by the Bajaj Auto management included the supply curbs from China on rare earth metals. China covers nearly 90% of the global rare earth processing capacity, and these play a crucial role in EV motors. Other automotive parts like speakers also use the rare earth magnets.
Volatility in commodity prices
The Bajaj Auto management expects input costs to rise 1% QoQ in Q1.. It has passed on about 30-50% of this increase to consumers. That apart the currency movement is also a key headwind given the large exports The impact of the rupee’s appreciation against the dollar needs to be analysed carefully, especially for commodity prices.
KTM turnaround
The Bajaj Auto management clearly showcased its intent to take a controlling stake in PBAG, which is the holdco of KTM. Once these approvals are in, the two-wheeler major may look to “leverage some of the synergies between the two companies.” These include joint sourcing for key raw materials, joint development program, and extension of the current agreement to include joint production of up to 900cc products. The pace of turnaround of KTM will be crucial while looking ar growth projections going forward.
Motilal Oswal on Bajaj Auto
Motilal Oswal has a Neutral rating on the stock with a target price of Rs 8,688 per share. This implies limited upside potential as of now. The target price is 2% below the current market price. The market share loss in domestic motorcycles, “that too in its bread and butter 125cc+ segment, remains the key concern,” added Motilal Oswal.
They believe that Bajaj Auto acquired a controlling stake in KTM under a lucrative deal but “its effectiveness depends on how quickly it is able to turn around its operations,” and this will be a key monitorable from hereon
Further, the ramp-up of its CNG bike Freedom has been slower than expected.
However, the brokerage house added that the recovery in exports and ram up of Chetak and its three-wheeler portfolio are key positives.
Axis Securities on Bajaj Auto
Axis Securities has a Buy rating on Bajaj Auto with target price of Rs 9,890 per share. This implies nearly 10% upside from current levels. They believe that the focus on expanding the premium motorcycle variants, electric two-wheeler and electric three-wheelers portfolio, along with leveraging new product launches and the gradual recovery in exports, “is expected to provide sufficient operational levers to sustain margins despite rising input costs.”
Axis Securities value the stock at a “sustainable PE multiple of 24x its FY27 core EPS. Valuations were previously estimated to be 23x FY27 earnings.
Bajaj Auto management outlook for FY26
In FY26, the management aims to focus on gaining leadership in the 125cc+ motorcycle segment, expanding exports with focus on Latin America. It also aims to scale up key platforms like Chetak, GoGo, and Freedom.
