Buy Bajaj Auto; target of Rs 12600: Motilal Oswal

What happened

Motilal Oswal said Bajaj Auto's second-quarter profit rose 35% from a year earlier to INR33.5 billion, helped by strong revenue growth. Profit per sale, meaning margin, was steady at 20.9% as currency gains, price rises and a better export mix offset higher input costs.

Confirmed

Global impact / market context

Steady profit per sale shows Bajaj Auto kept more of each rupee of revenue even as input costs jumped. That supports cash generation and dividends, which the broker cites. Because the stock trades near its forecast profit multiple, even small earnings disappointments could move the share price.

Analyst inference

The buy call rests on profit forecasts, strong returns on capital and large dividend payouts, not just past results. The INR12,600 target uses 24 times estimated core earnings two years ahead, so it depends on Bajaj Auto meeting growth expectations in a two-wheeler market with changing export demand.

Analyst inference

What to watch

1. Motilal Oswal set a buy rating with a target of INR12,600 per share, based on 24 times estimated core earnings per share two years ahead, meaning profit divided by shares outstanding. Confirmed
2. Watch whether input costs keep rising faster than price increases and currency gains; if so, the steady 20.9% profit per sale could shrink and weaken the earnings forecasts behind the target. Proposed
3. Track export mix and currency moves, since those helped offset costs this quarter. A reversal would pressure revenue and cash available for dividends, reducing support for the valuation. Analyst inference

Evidence

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