Brokerages Bullish On Bajaj Auto After Launch Of CNG Motorcycle

Brokerages are bullish on Bajaj Auto after the company launched the Bajaj Freedom, which it said is the "world's first compressed natural gas (CNG) motorcycle".

What Happened: Bajaj Freedom starts at the price range of ₹95,000 and could reduce operational costs by 50% compared to internal combustion engine (ICE) motorcycles. Freedom also has a dual-fuel capability with an auxiliary petrol tank of 2 litres, providing a combined range of 330 kilometres.

Brokerage Views: Nomura maintained "buy" call on the stock with a target price of ₹10,207. The brokerage found the CNG bike attractively designed with a premium look rather than a commuter bike's look. It could create a segment of its own over time, the brokerage believes. The research firm sees the potential to sell 5,000 to 10,000 bikes per month by the end of the year, with the only limiting factor being the waiting period at CNG pumps.

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Nuvama Institutional Equities also maintained "buy" call and hiked the target price to ₹12,000. It reasoned that the CNG model offers a better cost of ownership in comparison to petrol motorcycles and should attract cost-conscious customers.

The brokerage expects the company to sell 10,000 units per month in the second half of FY25 and 20,000 units in FY26. It expects the company's revenue and EBITDA to grow annually at 12% and 15% respectively over FY24-26, with a return on equity of 35%.

Contra View: Kotak Institutional Equities maintained “sell” call with a target price of ₹6,200. Kotak sees limited impact for the CNG bike in the 75-110 cc segment due to higher upfront costs.

The expansion of the CNG network will be key for pan-India adoption. Demand trends in Maharashtra and Gujarat will be key monitorables for the stock in the coming months, the research firm said. The brokerage said the stock is trading at 30 times the FY2026 earnings per share, which is expensive and factors in all the positives.

Price Action: Shares of Bajaj Auto fell 0.09% to ₹9,626.80 on Monday morning.

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Posted In: EquitiesNewsPrice TargetReiterationMarketsAnalyst RatingsBajaj Auto