Bajaj Auto Top Nifty50 Loser Despite Robust Q4 Earnings


by Sandip Das on 19 April 2024,  3 min read


Bajaj Auto exhibited robust financial performance in the fourth quarter, surpassing market expectations. However, despite this positive outcome, its shares experienced a decline of over 3 percent to Rs 8729.35 on April 19. It was also the top Nifty50 loser. This downward trend stemmed from concerns regarding the stock’s price, which had already exceeded brokerage target estimates, leading to perceived overvaluation.

Although brokerages commended the stellar earnings report for January-March, many maintained a ‘sell’ rating on Bajaj Auto, citing target prices significantly lower than the current market value. There’s a prevailing caution regarding the sustainability of the stock’s upward momentum, as analysts anticipate a gradual erosion of its recent gains, attributing this to the fact that most of the positive factors have already been factored into the price.

Throughout the year thus far, Bajaj Auto’s stock has demonstrated remarkable growth, surging over 32 percent to Rs 9,021, outperforming the benchmark Nifty 50 index by a substantial margin. Over the past twelve months, Bajaj Auto’s stock nearly doubled, making it the second-best performer among Nifty 50 constituents, trailing only Tata Motors.

CLSA analysts have adopted a ‘sell’ stance on Bajaj Auto, asserting that the recent rally has inflated the stock’s value beyond its intrinsic worth. Despite raising their target price to Rs 6,889 per share, they predict a 24 percent downside potential. CLSA anticipates growth in the domestic motorcycle segment in FY25, driven by new product launches. They noted that Q4 revenue exceeded expectations, primarily due to higher realizations and an improved product mix.

Bajaj Auto’s robust domestic performance compensated for subdued exports in Q4FY24. The company reported an 18 percent year-on-year increase in net profit to Rs 2,011.4 crore, with revenue rising by 30 percent YoY to Rs 11,249.8 crore. EBITDA also surged by 34.4 percent YoY, with operating margins expanding over 180 basis points to 19.7 percent in Q4.

Jefferies, on the other hand, issued a ‘buy’ recommendation for Bajaj Auto and revised its target price to Rs 10,500 per share. They anticipate a 19 percent compounded annual growth rate (CAGR) in earnings per share (EPS) over FY24-26, with FY25-26 EPS projected to be 7-9 percent higher than Street estimates.

Despite these optimistic outlooks, concerns persist regarding Bajaj Auto’s export business. Analysts at Motilal Oswal expressed apprehension about the uncertain export demand due to geopolitical challenges. They maintained a ‘neutral’ rating on the stock, with a target price of Rs 8,360 per share.

At 11:03 AM, Bajaj Auto was trading at Rs 8729.35 per share on NSE, down Rs 297.15 or 3.29 percent.


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