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On Friday, Morgan Stanley (NYSE:MS) adjusted its stance on Bajaj Auto (NSE:BAJA) Ltd (BJAUT:IN), downgrading the stock from Overweight to Equalweight and slightly reducing the price target to INR9,117.00 from INR9,128.00. The research firm’s analyst cited a mix of positive and negative factors influencing the decision.
The analyst acknowledged Bajaj Auto’s robust export outlook, noting management’s expectation of a 15-20% year-over-year growth in the coming quarters. The company has seen an improving export mix, particularly with a rising share in Latin America. For example, retail sales in Brazil hit 7,000 units in the fourth quarter of 2025, surpassing the entire sales of the previous fiscal year. Additionally, Bajaj Auto is targeting a capacity expansion to 50,000 units per annum by calendar year 2025.
Bajaj Auto’s performance in the electric vehicle (EV) segment was also highlighted as a positive. The company remains the market leader in electric two-wheelers (E2Ws) and, as of April 2025, has reached the top position in electric three-wheelers (EV 3Ws). With revenues exceeding Rs5.5 billion in fiscal 2025 from these segments, Bajaj Auto is planning to launch the E-Rick, which could potentially open up a new market of 40,000 units per month starting in July 2025.
On the downside, the analyst pointed out that Bajaj Auto’s corrective actions to arrest market share declines, which have been in effect since April, have shown limited results. Further actions could potentially pressure margins. The upcoming launch of an entry-level 125 CC motorcycle in fiscal 2026 and a price realignment may lead to a 30-50% under-recovery in commodity costs, which could impact margins by approximately 100 basis points in the near term.
The revision in Bajaj Auto’s stock rating and price target reflects Morgan Stanley’s analysis of these factors. The new price target of INR9,117.00, albeit marginally lower than the previous target, takes into account the company’s prospects and challenges ahead.
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