Bajaj Auto shares continued their upward momentum, hitting a new record high on September 13 after gaining over 1 percent to Rs 11,894, marking the fifth consecutive session of gains. The upbeat sentiment stems from the Union Cabinet approval of the PM E-Drive scheme with an outlay of Rs 10,900 crore for two years to bolster the adoption of electric vehicles (EVs) in India.
The scheme offers subsidies totalling Rs 3,679 crore to promote the use of battery-powered two and three-wheelers, ambulances, trucks, and other emerging electric vehicles.
The company’s market price has zoomed 145 per cent in the past one year, as compared to the 21.6 per cent rise in the BSE Sensex during the same period.
Bajaj Auto outperformed significantly compared to its peers, diven primarily by healthy growth in the domestic segment, with total volumes at 3.35 lakh units, up 18 per cent year-on-year (Y-o-Y).
For the month of August 2024, total volumes at Bajaj Auto were up 16.4 per cent YoY at 3.97 lakh units, within which the overall domestic segment grew at a healthy rate of 23.8 per cent YoY, whereas exports grew 5.4 per cent YoY.
The company has retained and extended its leadership in Maharashtra, while pipping TVS Motor to become the second largest player in Gujarat. It has gained market share on YoY and month-on-month (MoM) basis in all the states, with the launch of cheaper-priced scooters.
The company’s domestic business has maintained its momentum and resilience, registering its ninth successive quarter of double-digit growth in the June quarter (Q1FY25). This was driven by robust volume-led growth across all businesses and market share gains. The management expects domestic demand to continue to pave the way for another year of growth up ahead.
Bajaj Auto is engaged in the development, manufacturing and distribution of automobiles such as motorcycles, commercial vehicles, electric vehicles (EV), and their spare parts.
Over the past few years, the company has demonstrated robust product development capabilities, as reflected in model launches under the KTM and Husqvarna brands in the premium segment, CT and Platina in the economy segment and Pulsar and Dominar in the executive segment. Bajaj Auto has a strong market share in all these segments.
According to brokerage firm Sharekhan, although Bajaj Auto has been registering healthy volume growth though exports, it is yet to recover fully, while its recently launched CNG motorcycle has also been receiving a healthy response in the market. The company has also witnessed a sharp expansion in market share in the electric 2W market.
Despite the increase in EV volumes and its relatively high-margin export business yet to recover fully, Bajaj Auto has been sustaining its strong double-digit earnings before interest, taxes, depreciation and amortization (EBITDA) margin (around 20 per cent), led by a better product mix.
Further, Bajaj Auto has been gaining a healthy market share in the electric 2W wheeler space and is expected to expand its EV portfolio going ahead. The company hopes CNG motorcycles would help it in expanding its market share in the lower half of the motorcycle market.
Sharekhan said it continues to believe Bajaj Auto’s approach to cater to numerous segments via segment-specific brands, which is helping the company gain eyeballs when demand in the premium segment is surpassing demand in entry-level product segments.
“With improvement in its performance in the domestic market, Bajaj Auto has been registering a healthy traction in volumes as full recovery in the export market is still awaited. Volume performance is assumed to be supported by a gradual revival in rural markets, traction in the 125cc segment, and the upcoming festive season – all of which would further boost its volume growth in the near term,” the brokerage firm said.
Sharekhan retained its ‘Buy’ rating on the stock, with a revised target price of Rs 12,584, on account of its superior profitability, play on premiumisation, and expectation of a gradual recovery in exports.
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