Buy Bajaj Auto Ltd for the Target Rs.11,100 by Emkay Global Financial Services Ltd
The best risk-reward within 2Ws; upgrade to BUY
We upgrade BJAUT to BUY from Add and roll forward our TP to Dec-27E, hoisting it ~17% to Rs11,100 (from Rs9,500). This implies an upside of ~17% (+2.7% dividend yield in Dec-27E) on account of FY27E/28E EPS upgrade by ~4/9% and incorporating Bajaj Auto Credit at Rs300/sh, basis 2x FY28E P/B, given the meaningful ramp-up in operations (H1FY26 PAT at Rs2.3bn vs Rs0.6bn in FY25). We believe BJAUT offers an attractive risk-reward at current levels (1YF at 24x vs 38x/32x for TVSL/EIM), backed by strong exports trends coupled with launch of a refreshed Pulsar range in CY26 translating into a healthy 14% EPS CAGR over FY26E-28E. BJAUT’s overall domestic 2W market share has bottomed out, with slight pick-up, driven by market share of both premium motorcycles and e-scooters in Q3FY26TD. Export momentum remains strong, led by LatAm/Asia, which coupled with currency depreciation-led tailwinds should aid the overall margin trajectory given its strong exports volume mix (~44% mix as of FY26YTD vs 39% in FY25YTD). BJAUT’s e-3W portfolio has also scaled up meaningfully, and overtaken M&M to become the #1 in E-3Ws (~31.8% market share in Dec-25 vs 31.9% in FY25) while sustaining its #2 spot in E-2Ws for the last 4M, with EBITDA breakeven already achieved. Also, a gradual turnaround in KTM provides incremental upside potential.
Domestic 2W share at lowest; signs of pick-up in premium motorcycles/E-2Ws
BJAUT’s overall domestic 2W market share appears to have bottomed out (10.5% in Dec25 vs 10% in Q2FY25), with domestic motorcycle dispatches growing in a low single digit over the past 15M, marred by market-share loss in the Economy segment (11% volume mix in Q3FY26TD; 14% in Q3FY25); sequential pick-up seen in overall market share, led by 125cc/premium motorcycles in Q3FY26TD at 21.9/22.2% (vs 21.1/21.9% in Q2FY26), with export dispatches growing a healthy ~24% YoY in Dec-25. Within E-2Ws, BJAUT holds the #2 spot, with ~19% market share in Dec-25. BJAUT’s strategy to push newer (Pulsar, Chetak) models (~3-4 lined up in Q4) is likely to aid the market share trajectory.
BJAUT overtakes M&M in E-3Ws; Rupee depreciation to aid overall margins
In the fast-growing E-3W space (~33/37% FY26TD/Q3 penetration), BJAUT has now overtaken M&M as of Dec-25, with ~32% share. Export momentum is also strong, led by LatAm/Asia and eastern/southern Africa, which coupled with rupee depreciation-led tailwinds should aid the overall margin trajectory, given its strong exports volume mix (~44% mix as of FY26YTD vs 39% in FY25YTD).
BJAUT offers the best risk-reward at current levels
While structurally we continue to favor Ather and TVSL, we believe BJAUT offers the best risk-reward at current levels (at 24x 1YF PER vs 38x/32x for TVSL/EIM), backed by strong exports trends led by LatAm/Asia, coupled with the launch of a refreshed 125cc Pulsar range in CY26 which should translate into a healthy 14% EPS CAGR with ~2.7% Dec27E dividend yield. Additionally, a gradual turnaround in KTM provides incremental upside potential. We build in ~10/13/14% volume/revenue/EPS CAGR over FY26E-28E.
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