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Exports and EVs to remain the key growth drivers

Domestic demand appears to have slowed down in the first couple of months of FY27, with the Bajaj Auto (BJAUT) management expecting the industry to post 7-9% growth in the near term. However, Chetak has ramped up very well over the last few months, especially post the launch of the affordable C2501 model. Driven by its new launches and enhanced capacity, BJAUT targets a leadership position in 2W EVs going forward. We expect exports to remain a key growth driver even in FY27, as BJAUT continues to experience very strong demand from its key markets like LATAM and ASEAN. Further, the impact of rising input cost pressure is likely to be offset by: 1) price hikes taken in Apr and May’26; and 2) favorable currency. Overall, we expect BJAUT to post a 15%/15%/14% CAGR in revenue/EBITDA/PAT over FY26-28. At 24.6x/21.6x FY27E/FY28E EPS, the stock appears fairly valued. We reiterate our Neutral rating with a TP of INR10,025, based on 22x FY28E core EPS.

Domestic motorcycle demand has weakened post a strong 2HFY26

Demand for motorcycles in the domestic market has slowed down post a strong 2HFY26, with the industry likely to clock 7-9% volume growth in the near term, as per management. Further, one has to factor in the high base of 2HFY26 as well. BJAUT remains confident of outperforming the industry on the back of its new launch pipeline. We factor in BJAUT to post a 7% volume CAGR in domestic motorcycles over FY26-28E.

Exports to remain a key growth driver

Given the strong demand from its end markets (LATAM and ASEAN), it has seen a solid start with exports posting 58% YoY growth over Apr-May26. Even if one were to assume some slowdown in growth led by the ongoing geopolitical conflict, exports would remain a key growth driver for the current fiscal. We have factored in BJAUT to post 20% YoY growth in exports in FY27E.

Scaling up its EV business

On the back of its new launches, it targets a leadership position in 2W EVs going forward. Further, the overall EV segment, including both Chetak and 3Ws, has now delivered a double-digit EBITDA margin for the last couple of quarters. Given a steady improvement in EV margins, we expect BJAUT’s EV business to evolve into another viable growth driver for the company in the coming years.

Rising cost pressure – a near-term headwind

Given the rapid surge in input costs, the raw material basket is likely to jump by 4.5-5.0% of net sales in 1Q sequentially. BJAUT expects to offset a large part of this by: 1) price hikes taken in Apr and May’26, which will help offset 50% of this rise; and 2) favorable currency (USD-INR avg. at 94 vs. 90.6 QoQ). We expect BJAUT’s margins to contract ~30bp in FY27 and normalize back to 20.5% in FY28.

Valuation and View

While domestic 2W demand is moderating, exports are likely to remain a key growth driver for BJAUT. Further, a sharp surge in input costs is likely to limit margin upside. Overall, we factor in BJAUT to post 15%/15%/14% CAGR in revenue/EBITDA/PAT over FY26-28E. At 24.6x/21.6x FY27E/FY28E EPS, the stock appears fairly valued. We reiterate our Neutral rating with a TP of INR10,025, based on 22x FY28E core EPS.

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