Updated on: 2026-01-22 As of: 2026-01-22 Latest price: Rs 9,850 (NSE) as of 2026-01-22 Market cap: 2,75,000 crore Latest earnings period: Q2 FY26 (ended Sep 2025) Key sources: https://scanx.trade/stock-market-news/earnings/bajaj-auto-achieves-record-revenue-and-profit-in-q2-fy26-overcoming-supply-challenges/24062482; https://www.bajajauto.com/investors/financial-and-operational-performance; https://www.moneycontrol.com/financials/bajajauto/balance-sheetVI/BA10

Event: Bajaj Auto reported record Q2 FY26 standalone results with revenue at Rs 14,922 crore (up 14% YoY), EBITDA at Rs 3,052 crore (20.5% margin), and PAT at Rs 2,480 crore (up 24% YoY). Date: November 7, 2025 Why the Market Reacted: Investors celebrated the margin beat and export growth of 35% YoY, pushing the stock up 5-7% post-results amid optimism on premium bikes and spares. Why This Is Not Just News: While Q2 numbers look impressive, they mask dependency on volatile exports and unproven EV scale-up; deeper analysis tests if 20%+ margins are sustainable without favorable currency and commodity tailwinds.

Bajaj Auto's premiumization and export push have delivered record margins, but the thesis hinges on unproven EV execution and sustained commodity tailwinds amid rising domestic competition.

Bajaj Auto generates ~70% of revenue from two-wheelers (domestic 60%, exports 40%) and 25% from three-wheelers, with spares contributing high-margin 12% (Rs 1,800 crore in Q2 FY26, up 21% YoY). Profits stem from premium bikes like Pulsar NS and Dominar (40%+ of domestic volumes but 60% revenue), leveraging brand pull in 200-400cc segment where Bajaj holds 30% share vs Hero's mass-market dominance. Exports to 80+ countries (Africa, LatAm) drive volume but expose to forex swings—35% YoY growth in Q2 masked rupee depreciation benefits. Three-wheelers (RE rickshaws) offer stable 15-18% margins but face EV disruption. EV transition via Chetak scooter and Freedom 125 CNG (launched FY25) targets 10% mix by FY27, but capex of Rs 2,000+ crore annually strains ROCE unless adoption accelerates. Unlike Hero's ICE focus, Bajaj's KTM partnership aids tech but Pierer Mobility acquisition adds integration risks. Spares and finance arms (Bajaj Auto Credit) bolster cash flows (Rs 4,500 crore H1 FY26 FCF), funding dividends (Rs 5,864 crore paid). Balance sheet strength (Rs 14,244 crore surplus) supports buybacks, but margins >20% depend on aluminum prices <Rs 250/kg and USD/INR >85—both vulnerable. If EV volumes miss (current <5% mix), ICE commoditization could compress returns to 15%.

Q2 metrics reflect volume-mix tailwinds, but EBITDA margin stability masks rising EV R&D costs (up 20% YoY). ROCE expansion to 32% assumes sustained asset turns; if capex doubles for EVs without volume, it could dip to 25%. TTM PAT growth outpaces revenue due to spares leverage, but export normalization risks 10-15% earnings cut.

Consensus fixates on Q2 records and 15% CAGR forecasts, overlooking export cyclicality—35% growth came from LatAm rebound post-floods, but Africa (40% exports) faces Chinese dumping and 10% volume drop risks if rupee strengthens to 82/USD. Domestic premiumization assumes Pulsar loyalty holds vs TVS Apache gains (TVS up 25% in 200cc), but Hero's EV push (via Ather tie-up) could erode 10% market share if subsidies favor mass EVs under FAME III. EV thesis fragility: Chetak sales <20k/month vs Ola's 40k, with margins -5% vs ICE 25%; scaling requires battery localization (current import-dependent), vulnerable to PLI scheme delays or China tariffs. Spares growth (21%) rides ICE volumes, but 30% EV mix by FY28 implies 40% spares erosion unless aftermarket adapts. Commodity blind spot: aluminum at Rs 240/kg drove margins; 20% price hike reverts EBITDA to 18%. Management's 'robust FCF' ignores Rs 2,000 crore subsidiary infusions (KTM, Brazil)—if these yield <15% ROIC, cash pile shrinks, forcing dilution. Market prices flawless execution; reality is 50% probability of margin regression if any leg wobbles.

30x P/E embeds 18% EPS growth and 21% margins through FY28; if growth slips to 10% (industry norm), fair value drops to Rs 7,500 (25% downside). Premium to peers prices EV moat and FCF, but EV miss justifies 20x multiple compression. Dividend yield 2.5% supports hold if yields rise elsewhere.

Base case (50% weight) assumes moderate execution; bull requires flawless EV ramp (low prob given competition); bear triggers on forex/commodity reversal. Probability-weighted target Rs 9,300 implies limited upside from current levels unless Q4 volumes surprise.

• Export volumes <10% YoY growth for 2 quarters, signaling cycle peak and 15% PAT cut.
• FAME III subsidy cuts or SEBI scrutiny on related-party KTM investments exceeding Rs 5,000 crore.
• Net cash dips below Rs 10,000 crore from EV capex overruns, forcing debt or dilution.

Bajaj trades at premium on margins/ROCE but lags TVS on growth; deserves multiple if EV closes gap, discount if exports prove unsustainable vs Eicher’s Royal Enfield stability.

• Q4 FY26 domestic premium bike volumes (>40% mix) and EV sales (>30k units/month).
• Management guidance on EV capex returns and KTM integration in next concall.
• Aluminium prices and USD/INR; FAME III policy updates impacting subsidy flows.

Bajaj Auto's Q2 FY26 strength underscores a resilient model blending premium ICE, spares, and early EV bets, but sustaining 20%+ margins demands perfect alignment of exports, commodities, and execution—assumptions easily broken by rupee appreciation or EV delays. Valuation at 30x prices aggressive growth, leaving room for 20-25% downside if volumes revert to 8-10% (base case). Uncertainty centers on EV scale-up amid Ola/TVS rivalry and export normalization; balance sheet cash provides cushion but not immunity. Investors should monitor Q4 volumes and commodity trends—bull case alive only if EV hits 10% mix by FY27, else rotate to steadier peers. This remains a watchlist stock for cycle-savvy portfolios, not a set-and-forget holding.