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Exports Upswing, 3W Leadership, & Captive Finance Flywheel in Motion

Est. Vs. Actual for Q2FY26: Revenue – BEAT; EBITDA – BEAT ; PAT – BEAT

Change in Estimates Post Q2FY26:

FY26E/FY27E: Revenue 0.8%/0.2%; EBITDA 1.1%/0.6%; PAT 0.5%/0.6%

Recommendation Rationale

* International Market: Bajaj Auto delivered a strong performance in international markets in Q2, with export volumes up 24% YoY to over 550,000 units, marking the highest-ever quarterly export revenue. The company outpaced industry growth in its top 30 emerging markets, which collectively grew ~14% with Bajaj growing at 1.5x, indicating market share gains. LATAM posted its best-ever quarter, led by Colombia and Mexico, while the Brazil subsidiary crossed 8,000 units in Q2 and is now profitable, supported by localised manufacturing. Asia and Africa also recorded double-digit growth, with strong traction in Sri Lanka, the Philippines, and East Africa, while Nigeria remained stable at the retail level despite ongoing macro recovery. The CV export segment grew 67% YoY, reflecting sustained product and channel development efforts. Management expects export momentum to remain strong, supported by improved market conditions, localised manufacturing, and further recovery in key regions.

* 3W’s Portfolio: Bajaj Auto remains strongly positioned across ICE autos, e-autos, and erickshaws. The GST rate cut is improving payback economics and is expected to lift the ICEauto segment from ~5% decline to flat to slight growth, which is favourable given Bajaj’s ~80% market share and strong profitability in RE CNG. In e-autos, industry growth has moderated to ~50% YoY, but Bajaj expects to regain market leadership from Q3 as supply constraints ease, supported by a wider product portfolio than peers. The e-rickshaw segment is undergoing regulatory-led consolidation, where Bajaj has already entered and aims to capture a meaningful share. Overall, management views the three-wheeler business as a structurally large and profitable opportunity, where Bajaj’s brand strength, product breadth, and distribution network position it to sustain leadership.

* Bajaj Auto Credit Limited; A Silent Value Compounder: BACL delivered Rs 132 Cr PAT in Q2FY26, a ~29% QoQ increase. AUM stands at Rs 14,000 Cr and penetration at ~40%. Bajaj infused Rs 500 Cr this quarter to support aggressive but profitable growth. This captive NBFC flywheel is increasingly accretive to core RoE and valuations.

Sector Outlook: Positive

Company Outlook & Guidance: In FY26, the management’s focus is on gaining leadership in the 125cc+ motorcycle segment, expanding exports, especially in Latin America and scaling key platforms like Chetak, GoGo, and Freedom. Expanding operations in Brazil, reviving KTM, boosting spares performance, and growing Triumph in India remain key priorities. The company also aims to balance growth with profitability amid ongoing market volatility.

Current Valuation: 23x its Mar'28E core EPS (Previously 22x Mar'28), plus PMAG stake and cash reserves at 1x book value.

Current TP: Rs 9,765/share (Earlier TP: Rs 9,360/share)

Recommendation: We maintain our BUY rating on the stock.

Financial Performance: Bajaj's Q2FY26 beat our estimates on all fronts. Total revenue grew ~13.7% YoY and 18.6% QoQ, driven primarily by growth in volumes and better ASP (up 5% YoY) due to higher exports and an improved CV mix. EBITDA increased by ~15.1% YoY (up 23% QoQ) and EBITDA margins increased by 73 bps to 20.5%, due to lower dollar realisations and commodity inflation, being offset by improved mix and operating leverage. PAT rose 23.7%/18.3% YoY/QoQ.

Outlook: We recommend a BUY on Bajaj Auto Ltd, supported by strong multi-cylinder growth triggers across domestic premium motorcycles, export rebound, a disciplined 3W and EV scale-up, and a sharply improving financial services business through BACL. Despite near-term noise around EV supply chain constraints and FX headwinds, Bajaj’s capital-efficient model, leadership in key segments, and countercyclical balance sheet strength support rerating potential.

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