Emkay Global Financial Services has upgraded Bajaj Auto to a BUY, arguing that the stock now offers the most compelling risk-reward profile within the Indian two-wheeler segment. The brokerage has raised its 12-month target price to Rs 11,100, implying nearly 17% upside from current levels, supported by accelerating export momentum, a rebound in domestic premium motorcycles, and a decisive leadership position in electric three-wheelers. Currency tailwinds, margin expansion, and an improving earnings trajectory underpin Emkay’s conviction that Bajaj Auto is entering a structurally stronger growth phase through FY28.

Re-rating Bajaj Auto: From tactical caution to structural conviction

Emkay Global has upgraded Bajaj Auto from ADD to BUY, marking a clear shift in stance as multiple operational and financial levers align simultaneously. The revised target price of Rs 11,100—rolled forward to December 2027 earnings—reflects higher earnings estimates, improved margin visibility, and the formal inclusion of Bajaj Auto Credit in the valuation framework. At current levels, the stock trades near 24x one-year forward earnings, a meaningful discount to peers despite a superior export mix and balance-sheet strength.

Key re-rating trigger: FY27–FY28 EPS estimates have been upgraded by 4–9%, driven by export recovery, electric vehicle scale-up, and currency-led operating leverage.

Exports emerge as the dominant earnings engine

Bajaj Auto’s export franchise has reasserted itself as a core earnings driver. Exports now account for roughly 44% of total volumes, up from 39% a year earlier, with Latin America, Asia, and Africa leading the recovery. Two-wheeler exports are projected to reach 2.6 million units by FY28, while three-wheeler exports are expected to climb to 0.4 million units over the same horizon.

Margin impact: The rising export mix, combined with rupee depreciation, is enhancing EBITDA margins, which Emkay forecasts will expand to 21% by FY28, among the strongest in the sector.

Domestic two-wheelers show early signs of stabilization

After several quarters of market-share erosion, Bajaj Auto’s domestic two-wheeler business appears to have bottomed out. Overall market share improved to ~10.5% in December 2025, compared with ~10% in mid-FY26. Importantly, gains are being led by 125cc motorcycles and premium segments, where Bajaj’s Pulsar franchise continues to regain traction.

Strategic pivot: Management’s renewed focus on refreshed Pulsar launches and selective premium positioning is expected to stabilize volumes and support a gradual recovery in domestic profitability.

Electric three-wheelers: Bajaj Auto takes pole position

One of the most decisive shifts in Bajaj Auto’s competitive standing is unfolding in electric three-wheelers. The company has now overtaken Mahindra to become the market leader, commanding approximately 32% market share as of December 2025. Electric three-wheeler penetration has reached an all-time high of ~37%, structurally reshaping the segment.

Operational milestone: Bajaj Auto’s electric vehicle portfolio has already achieved EBITDA breakeven, removing a key earnings overhang and opening the door for operating leverage as volumes scale.

Electric two-wheelers add optional upside

In electric scooters, Bajaj Auto maintains the No. 2 position, with market share hovering near 19%. While competition remains intense, the Chetak platform has demonstrated resilience, and Emkay expects incremental gains as product refreshes roll out through FY26.

Long-term view: While not the primary valuation driver today, electric two-wheelers provide optional upside in a segment where scale economics are improving rapidly.

Financial trajectory points to sustained compounding

Emkay projects a 14% EPS CAGR over FY26–FY28, supported by double-digit volume growth, improving realizations, and steady cost discipline. Revenues are expected to grow at ~13% CAGR, while EBITDA is forecast to compound at ~14%, reinforcing Bajaj Auto’s position as a high-quality cash generator.

Balance-sheet strength: The company remains net-cash positive, with rising free cash flow supporting dividends of nearly 2.7% yield by December 2027.

Valuation framework and target price rationale

Emkay values Bajaj Auto using a sum-of-the-parts approach, applying 26x December-2027 core EPS to the standalone business. Additional value is attributed to investments in KTM/Pierer Mobility, surplus cash, and Bajaj Auto Credit—valued at Rs 300 per share based on 2x FY28 price-to-book.

Target price: Rs 11,100
Implied upside: ~17% from current market price
Dividend yield: ~2.7% by Dec-27E

Why Bajaj Auto now offers the best risk-reward

Among large two-wheeler manufacturers, Bajaj Auto combines export dominance, electric leadership in three-wheelers, and balance-sheet resilience. While peers may offer higher domestic exposure, Emkay argues that Bajaj’s diversified earnings base and margin tailwinds justify a premium re-rating.

Bottom line for Investors: With downside risks increasingly capped and multiple growth engines firing simultaneously, Bajaj Auto stands out as the most attractive risk-adjusted opportunity in the sector.