On Thursday, Axis Capital (NYSE:AXS) Limited updated its stance on Bajaj Auto Ltd (BJAUT:IN), increasing the price target to INR8,000.00 from INR7,500.00. Despite the revised target, the firm maintained its Sell (4) rating on the stock.
The analyst at Axis Capital Limited provided insights into Bajaj Auto's performance, noting that the company's EBITDA for the second quarter of fiscal year 2025 grew by 24% year-over-year. This growth was reported to align with expectations, as cost reduction efforts helped balance the impact of lower-than-anticipated gross margins.
During a recent conference call, Bajaj Auto's management discussed current market conditions, revealing that motorcycle demand during the festive season remained flat compared to the previous year, which was unexpected and seen as a negative development.
However, the company's exports showed signs of recovery, with strong year-over-year growth in Latin America and sequential growth in Africa, which aligned with Axis Capital's forecasts.
Axis Capital also commented on Bajaj Auto's strategic moves, highlighting the company's aggressive growth strategy in the electric vehicle (EV) sector, encompassing both two-wheeler (2W) and three-wheeler (3W) segments. This approach was acknowledged as a positive factor.
The firm's cautious stance on Bajaj Auto's stock is influenced by high earnings growth expectations, which carry potential downside risks, coupled with what is perceived as an expensive valuation. Despite the higher price target, Axis Capital advises maintaining a Sell rating on the shares, citing the aforementioned factors as the basis for their cautious view.
InvestingPro Insights
Bajaj Auto's recent performance and strategic moves have caught the attention of both analysts and investors. While Axis Capital maintains a cautious stance, InvestingPro data provides additional context to the company's financial health and market position.
According to InvestingPro, Bajaj Auto has demonstrated strong financial performance, with revenue growth of 20.43% over the last twelve months as of Q1 2025. This aligns with the company's aggressive growth strategy in the EV sector mentioned in the article. The company's EBITDA growth of 31.05% over the same period further underscores its operational efficiency, which is reflected in the cost reduction efforts noted by Axis Capital.
InvestingPro Tips highlight that Bajaj Auto holds more cash than debt on its balance sheet, indicating a strong financial position that could support its ambitious EV expansion plans. Additionally, the company has maintained dividend payments for 17 consecutive years, which may appeal to income-focused investors despite the current market challenges.
However, it's worth noting that Bajaj Auto is trading at a high P/E ratio of 38.87 relative to its near-term earnings growth, which aligns with Axis Capital's concerns about expensive valuation. This metric supports the analyst's cautious view on the stock's current price levels.
Investors seeking a more comprehensive analysis can access 15 additional InvestingPro Tips for Bajaj Auto, providing a deeper understanding of the company's financial health and market position.
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