On Wednesday, Bajaj Auto Ltd (BJAUT:IN) shares received an optimistic update from Goldman Sachs, as the firm's analyst upgraded the stock from Neutral to Buy and increased the price target to INR12,500 from INR12,000. The revised target suggests a potential upside of 21% from the previous target.
The upgrade is based on several key growth indicators. Goldman Sachs anticipates a 17% growth in domestic two-wheeler (2W) volumes for Bajaj Auto in the fiscal year 2025, driven by the company's diverse range of internal combustion engine (ICE), compressed natural gas (CNG), and electric two-wheeler models.
Moreover, the firm sees a significant expansion opportunity in the three-wheeler (3W) segment, as Bajaj Auto is expected to launch electric rickshaws within the next 12 months, which could increase the addressable market by approximately 55%.
Another positive factor contributing to the upgrade is the expected recovery in export markets, with notable improvements in Latin American and African markets, where exports account for around 36% of Bajaj Auto's volumes.
The analyst also highlighted that the current two-wheeler cycle has more room for growth, as monthly volume run rates are still 4% below the pre-COVID peak, in contrast to the car market which is already 25% above its pre-COVID peak.
Goldman Sachs also mentioned Bajaj Auto's stable positioning in the growing 125cc motorcycle market. In light of these factors, the firm has raised its earnings per share (EPS) estimates for fiscal years 2026 and 2027 by up to 4%. The new EPS forecasts for fiscal years 2025 and 2026 are 7% and 18% higher, respectively, than the consensus estimates from Institutional Brokers' Estimate System (IBES).
In the bullish and bearish case scenarios outlined by the analyst, Bajaj Auto's stock has a potential upside of 41% and a downside risk of 15%, respectively. This rating change reflects Goldman Sachs' confidence in the company's growth prospects and market opportunities.
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