Bajaj Auto, one of India’s leading two-wheeler manufacturers, is facing a potential setback as global brokerage firm CLSA predicts a significant drop in its stock price. CLSA has maintained its ‘underperform’ rating and set a target price of ₹7,000, which indicates a possible decline of 40% from its current levels. This prediction has led to pressure on the company’s stock, which was trading down by 0.55% at ₹11,884.25 on the NSE as of September 18.
What’s Behind CLSA’s Prediction?
Increasing Competition
Bajaj Auto has recently launched new models such as the Speed T4 and MY25 Speed 400, but despite these efforts, the company is facing challenges in the premium motorcycle segment. The competition in this segment has intensified, which could impact the company’s performance in the high-end bike market.
Slow Growth in 250cc+ Segment
According to CLSA, slow growth in motorcycles with engine capacities over 250cc is another area of concern. While Bajaj Auto has seen success with its Triumph motorcycles, delivering around 60,000 units in FY24, the company may struggle to maintain this momentum due to the increasing competition and demand issues in this segment.
Export Market Challenges
One of Bajaj Auto’s key challenges lies in its export markets. Countries like Nigeria are major markets for the company, and while Executive Director Rakesh Sharma has noted improvements in retail sales in Nigeria, CLSA remains cautious. Export markets are still under pressure, and this could negatively affect Bajaj Auto’s overall performance.
Mixed Analyst Opinions on Bajaj Auto
While CLSA has a cautious outlook, the broader analyst community has a more varied take on Bajaj Auto. Out of 45 analysts, 13 recommend selling the stock, while 10 suggest holding it. However, 22 analysts have given a ‘buy’ rating, indicating a more positive outlook from a portion of the market.
A Great Year for Bajaj Auto So Far
Despite the concerns raised by CLSA, 2024 has been a stellar year for Bajaj Auto. The stock has gained around 78% this year, and it has delivered multibagger returns of 130% over the past 12 months. In comparison, the Nifty index has increased by just 17% in 2024 and 26% over the last year. This stark contrast shows that while Bajaj Auto has faced some challenges, it has still been a strong performer in the Indian stock market.
What’s Next for Investors?
The outlook for Bajaj Auto remains mixed, with export market pressures and stiff competition in the premium segment being major concerns. However, with the company’s strong growth in 2024 and its impressive returns over the last year, it will be interesting to see how the stock reacts to these challenges moving forward. Investors should keep an eye on the developments in Bajaj Auto’s key markets and the competition in the premium bike segment.
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