On Thursday, Nomura/Instinet revised its rating on Bajaj Auto Ltd (BJAUT:IN), shifting from Buy to Neutral. The firm also increased its price target for the automaker's shares to INR11,737, up from the previous target of INR10,926. The adjustment follows a substantial year-to-date increase in Bajaj Auto's stock price, which has seen a 71% rise compared to the Nifty 50's 15% gain.
The analyst from Nomura/Instinet acknowledged Bajaj Auto's strong performance prospects, citing three key drivers: the company's ongoing success in the Compressed Natural Gas (CNG) segment, a rebound in export markets, and further achievements in the electric vehicle (EV) two-wheeler sector, propelled by an affordable model and network expansion.
Despite the positive performance indicators, the analyst pointed to the stock's current valuation as a reason for the downgrade. Bajaj Auto's shares are now trading at approximately 25 times the forecasted core earnings per share (EPS) for the fiscal year 2027, which aligns with the upper end of Nomura/Instinet's expected valuation range of 20 to 25 times earnings.
The Nomura/Instinet analyst maintained a positive long-term outlook for Bajaj Auto, suggesting that while the current valuation reflects the stock's recent success, it warrants a more cautious rating in the short term. The revised price target represents an increase in expected share value, indicating a continued belief in the company's growth potential.
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