On Thursday, Bajaj Auto Ltd (BJAUT:IN) shares saw its price target increased to INR 6,800 from INR 6,500, though the Sell rating on the stock was maintained by Citi.
The revision followed the company's first-quarter results for the fiscal year 2025, which surpassed expectations due to a stronger product mix that boosted average selling prices (ASPs) and gross margin. Additionally, the Production Linked Incentives (PLI) for electric vehicles (EVs) were noted to have bolstered profitability.
The management of Bajaj Auto expressed a positive outlook, anticipating a 6-8% volume growth in the domestic two-wheeler (2W) industry for the fiscal year 2025. The company's own volume growth is expected to outpace the industry, particularly in the segment of premium models greater than 125cc.
The firm is also strategically focusing on electric three-wheelers (E3Ws), which are projected to yield profitability on par with internal combustion engine (ICE (NYSE:ICE)) three-wheelers.
The gradual recovery of export demand was highlighted as a positive development for Bajaj Auto. However, despite the robust performance in the first quarter, the company did experience a slight decrease in domestic market share. Another point of caution raised by Citi was the potential pressure on margins as lower-priced electric two-wheelers (E2Ws) gain market traction.
The report from Citi underscores the company's successful quarter, driven by strategic product positioning and favorable government incentives, while also pointing out the challenges posed by the evolving two-wheeler market and competitive pressures. Bajaj Auto's focus on premium models and the electric vehicle segment appears to be a key part of their strategy moving forward.
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