Bajaj Auto Q3 FY26: Profit Jumps 18.6%, Valuations Divide Analysts

Introduction

Bajaj Auto announced a robust financial performance for the third quarter of fiscal year 2026, driven by strong volume growth and resilient profit margins. The company reported an 18.6% year-on-year increase in net profit and surpassed the ₹15,000 crore mark in quarterly revenue for the first time. Despite the strong operational results, brokerage firms are divided on the stock's future prospects, with significant debate centered on its elevated valuation levels.

Q3 Financial Performance in Detail

For the quarter ending December 2025, Bajaj Auto's net profit rose to ₹2,502 crore. This figure was marginally below street estimates, primarily due to a one-time adjustment related to new labour codes. On a pre-exceptional basis, the profit after tax crossed the ₹2,500 crore milestone. Revenue from operations grew by 18.8% year-on-year to reach ₹15,220 crore, a new quarterly record for the automaker. The company's earnings before interest, taxes, depreciation, and amortization (EBITDA) saw a significant 22.5% on-year increase to ₹3,161 crore, beating analyst expectations. The EBITDA margin stood firm at 20.8%, showcasing the company's ability to manage costs effectively despite commodity price pressures.

Operational Highlights and Management Outlook

Management expressed optimism about the near-term future, forecasting a 12-15% growth for the domestic two-wheeler industry over the next six months. The company aims to outpace this industry growth, particularly in the 125cc-plus segment, which is expected to be a key growth driver. To achieve this, Bajaj Auto plans to launch a refreshed Pulsar portfolio over the next several months and introduce a new 125cc motorcycle later in the year. The export market also remains a strong pillar, with the company expecting to sustain a run rate of over 200,000 units per month, implying a 20-25% year-on-year growth. Furthermore, the electric vehicle segment is becoming a significant contributor, accounting for approximately 25% of domestic revenue in Q3.

Financial Performance Snapshot

Brokerage Views: The Bullish Case

Several brokerages remain positive on Bajaj Auto, citing the strong operational momentum and demand recovery. Goldman Sachs maintained a 'Buy' rating with a target price of ₹11,500, implying a potential 20% upside. The firm pointed to early signs of a turnaround in domestic two-wheeler demand and expects the company's upcoming product launches to support market share gains. Similarly, CLSA reiterated an 'Outperform' call with a target of ₹11,410. CLSA highlighted the company's resilient EBITDA margin and noted that currency tailwinds are aiding export realisations, which should help protect margins against commodity inflation in the coming quarter.

Brokerage Views: A Cautious Stance

On the other hand, valuation concerns have tempered optimism for some analysts. Jefferies maintained a 'Hold' rating with a target of ₹9,100, flagging that the stock trades at 24 times its FY27 estimated earnings, a premium to its long-term average of 21x. While positive on demand, Jefferies expressed concern over market share erosion in domestic motorcycles. Nomura also retained a 'Neutral' rating, viewing the valuation of around 20 times FY28 earnings as fair. UBS took the most bearish stance, maintaining a 'Sell' rating with a target of ₹9,015. UBS argued that Bajaj Auto's motorcycle-heavy portfolio remains a structural challenge, despite a supportive industry outlook.

Analyst Ratings at a Glance

The Valuation Dilemma

The central point of divergence among analysts is the stock's valuation. While the company's performance is strong, its stock price already reflects much of this optimism. Trading at a premium to its historical average suggests that the market has high expectations for future growth. The key question for investors is whether Bajaj Auto can deliver sustained market share gains and earnings growth to justify this premium. Any slip-ups in execution or a slowdown in demand could put pressure on the stock.

Conclusion: Strong Performance Meets High Expectations

Bajaj Auto has delivered a commendable performance in Q3 FY26, with record revenues and healthy profit growth. The management's outlook is confident, backed by a strong product pipeline and favorable market conditions. However, the stock's elevated valuation remains a key overhang, creating a clear divide among market analysts. The successful execution of its upcoming product refreshes and its ability to gain market share in the competitive domestic market will be critical in determining the stock's trajectory in the coming months.