Bajaj Auto has exhibited robust performance in Q2 FY26, driven by strong growth in domestic volumes, exports, and electric vehicle (EV) segments. ICICI Securities recommends a BUY on Bajaj Auto with a 12-month target price of Rs 10,250, based on its diversified portfolio, favorable GST reforms, and expanding global presence. Key catalysts include sustained premiumization in the 125cc segment, healthy export momentum with a 24% YoY volume rise, and a profitable EV business scaling up. Margins are expected to remain stable amid commodity pressures, supported by operating leverage and currency tailwinds. The stock trades at a reasonable valuation of 27x FY27E earnings, implying attractive upside for investors.

Research House and Recommendation

ICICI Securities Retail Equity Research has assigned a BUY rating for Bajaj Auto, with a target price of Rs 10,250 on the stock, representing a potential upside from the current market price of Rs 8,720. The recommendation is anchored on Bajaj Auto’s consistent growth across key business segments and expectations of sustained profitability in FY26-27. The valuation multiple stands at 27x price-to-earnings (PE) for FY27 estimates, reflecting confidence in earnings growth and market leadership.

Q2 FY26 Performance Highlights

- Total operating income for Q2 FY26 stood at Rs 14,922 crore, up 14% year-over-year (YoY). - Volumes grew 6% YoY to 13 lakh units, driven by broad-based recovery in two-wheelers, three-wheelers, and exports. - EBITDA reached Rs 3,052 crore with a margin expansion of 40 basis points quarter-on-quarter (QoQ) to 20.5%. - Profit after tax (PAT) surged 24% YoY to Rs 2,480 crore. - Blended average selling price (ASP) per unit increased 2.5% QoQ to Rs 1.1 lakh.
These financials illustrate the company’s ability to capitalize on positive demand dynamics and operational efficiencies.

GST Rationalization and Domestic Growth

The recent government-led GST rationalization, reducing rates from 28% to 18% for small cars, two-wheelers up to 350cc and three-wheelers, is a structural reform expected to boost the domestic auto industry. Bajaj Auto, with its strong presence in the 125cc premium category, is positioned to benefit significantly from this trend. The rural economy’s favorable monsoon outlook and improved farm incomes underpin sustained volume growth. Notably, Bajaj’s strategy eschews an aggressive push in the 110cc segment, focusing instead on premiumization, which offers better margin and ASP expansion potential.

Exports and Global Expansion

Exports have been a key driver, with volumes growing 24% YoY in Q2 FY26. Bajaj continues to expand its footprint in over 30 international markets, particularly in Latin America and Asia. The company’s export portfolio recorded a revenue milestone of USD 600 million this quarter, reflecting higher realizations from premium motorcycles and resumed shipments of KTM models. Growth in emerging markets outpaced industry averages by 1.5x, underscoring Bajaj’s market share gains. Planned capacity expansions, such as Brazil’s local assembly targeting 50,000 units annually, bolster its global competitive positioning.

Electric Vehicle (EV) Segment Momentum

Bajaj Auto’s EV business marked record revenue contributions in the quarter despite supply constraints related to rare-earth magnets and electronic components. The company is now achieving double-digit EBITDA margins in its combined two- and three-wheeler EV portfolio and anticipates accelerated growth as supply chain issues ease. Bajaj’s multi-model EV strategy, including small body and wide-body variants, aims to cater to diverse customer use cases, reinforcing its leadership in the domestic EV segment.

Consumer Financing Business - BACL

The captive financing arm, Bajaj Auto Credit Limited (BACL), continues to scale profitably with assets under management (AUM) hovering between Rs 14,000-15,000 crore. The business recorded a quarterly profit of Rs 132 crore, maintaining an attractive return on equity (ROE) of around 17%. BACL’s AAA/A1 credit ratings and additional funding approvals enhance Bajaj’s ecosystem for retail financing, supporting volume growth and premiumization.

Margin Outlook and Commodity Costs

While commodity inflation challenges remain—steel, rhodium, platinum, copper, and rubber have exerted upward pressure—Bajaj Auto’s margins are cushioned by operating leverage and favorable currency swings. The management has opted against broad price hikes, preferring to monitor currency as a natural hedge. EBITDA margins are expected to sustain around 20.2%-20.6% through FY26 and FY27 amid stable product mix and cost management.

Valuation and Price Levels

Stock Levels for Investors

- Support Levels: Rs 8,000 - Rs 8,200 zone provides a strong base reflecting solid historical demand and institutional interest. - Resistance Levels: Fresh supply supply and profit booking may appear near Rs 9,400 - Rs 9,600; crossing Rs 10,000 could trigger further momentum. - Target Price: Rs 10,250 over the next 12 months, based on conservative growth and margin assumptions. - Investors are advised to accumulate on dips near support levels while keeping an eye on quarterly earnings for confirmation of volume and margin trends.

Risks to Consider

- Lower-than-anticipated growth in export markets could cap overall revenue expansion. - Currency fluctuations may impact margins in the short to medium term. - Supply chain bottlenecks, especially in EV components, could constrain growth if not resolved timely. - Commodity cost inflation remains a margin headwind, although management has tools to mitigate these effects.

Conclusion

Bajaj Auto stands at an inflection point, leveraging structural reforms, premiumization trends, and global expansion to sustain its growth trajectory. The company’s diversified product portfolio, including a profitable and expanding EV segment, offers compelling medium to long-term investment potential. ICICI Securities’ BUY rating and Rs 10,250 target price reflect confidence in Bajaj Auto’s ability to outperform peers.