Top Conviction Ideas : Buy Bajaj Auto Ltd for Target Rs. 9,360 - Axis Securities Ltd
* International Market: Q1FY26 exports touched an all-time high (~$500 Mn) in revenue terms despite volume still being ~20-25% below FY22 levels, highlighting pricing power and premium mix benefits. As per management, LATAM and Southeast Asia (apart from Nigeria, Africa) are in an upward cycle, and Brazil—a structurally tough market—is now showing clear traction (7,000 units). Dominar, Pulsar 400Z, and KTM export momentum is expected to sustain. Capacity expansion in Brazil is expected to unlock the next leg of volume growth (50,000 units per annum). Management guides for 15–20% QoQ export growth in FY26, supported by strong demand, market recovery, and product mix improvement.
* EVs Gaining Momentum: Bajaj’s EV portfolio (Chetak and E-3Ws) is now at high single-digit EBITDA margins, a sharp reversal from red territory in FY24. Despite near-term HRE magnetbased supply chain headwinds, Bajaj is pursuing multiple mitigation strategies. The company has thus cemented the pole position at 31% in e-2W vehicles. Short-term supply bottlenecks are likely priced in, but structural cost leadership and product acceptance offer a high-ROI EV optionality.
* Bajaj Auto Credit Limited: A Silent Value Compounder: BACL delivered Rs 102 Cr PAT in Q1FY26, doubling FY25 annual PAT. AUM now stands at Rs 12,000 Cr and penetration at 40%. Bajaj has infused Rs 300 Cr this quarter to support aggressive but profitable growth. This captive NBFC flywheel is increasingly accretive to core RoE and valuations.
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