Bajaj Auto shares drop 5% after 8% dip in October sales

Auto heavyweight Bajaj Auto shares fell 5% during early trade on Monday after the company reported weak sales in October 2024. Shares opened a gap up but soon fell to the day's low at ₹9,401 on the BSE, 22% lower than its 52-week high of ₹12,772.15 touched on September 27, 2024. The BSE Sensex and the Nifty 50 were trading 1.5% lower on Monday morning.

At the current share price of ₹9429.80, down 4.54%, the company's m-cap stands at ₹2,63,799.30 crore. Bajaj Auto shares have delivered a 75.57% return to its shareholders in the past year, while it has risen 41.44% in the calendar year 2024. The auto stock has added 4.70% in six months, while it corrected nearly 19.47% in the past month as investors booked profit at higher levels.

Bajaj Auto recorded an 8% fall in domestic sales for October 2024 at 3.03 lakh compared to 3.29 lakh in the same period last year. Exports, however, surged 24% to ₹1.75 lakh units, up from 1.41 lakh units in the year-ago period.

Cumulatively, the company's sales increased by just 2% to 4.79 lakh from 4.71 lakh in the year-ago period. Of the total sales, domestic two-wheeler sales declined 8% to 2.55 lakh as compared to 2.78 lakh in the year-ago period. Commercial vehicle sales dipped 6% domestically to 47,922 from 51,132 in the year-ago period, while exports recorded 46% growth at 17,413 units.

For the second quarter ended September 2024, the two-wheeler major reported a 31.4% drop in its consolidated net profit after tax (PAT) to ₹1,385.44 crore as compared to ₹2,020.05 crore in the same period of the last fiscal. The bottom line growth was dented by the payment of ₹211 crore to account for a one-time impact on deferred tax on investment income due to changes in the taxation structure.

The revenue from operations, however, grew 22.2% to ₹13,247.28 crore in Q2 FY25, from ₹10,838.24 crore in the corresponding period last year, driven by strong vehicle sales and spares as well as recovery in exports. Sequentially, the profit was down 28.65%, while revenue from operations rose by 11%. On the operating front, the EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortisation) touched an all-time high of ₹2,653 crore, up 24% year-on-year.

Motilal Oswal in its Q2 FY25 analysis maintained a ‘neutral’ rating on Bajaj Auto with a target price of ₹11,450, citing that the stock is fairly valued. “The stock has outperformed the Nifty Auto Index over the last 12 months, fueled by market share gains in the 125cc+ domestic motorcycle segment, improved margins, and a unique shareholder reward policy. However, the stock now trades at 38.5x/30x FY25E/26E EPS and appears fairly valued.”

Anand Rathi also recommended a "BUY" call, with a sum-of-parts target of Rs14,000. "We expect Bajaj Auto’s volume growth to be stronger in FY26 (>20%) after 13% expected in FY25. The success of its CNG motorcycle launch, a rebound in Africa and an EV ramp-up would be key drivers of a strong performance. We expect the company to be the best performer in the industry in FY26 (>20% growth; TVS 15%, Hero MotoCorp 11%) driven by market-share gains on the success of its CNG 2Ws, EVs and Triumph range."