Introduction: Bajaj Auto shares witnessed a sharp plunge of over 10% on Thursday, October 17, following the company's announcement of its Q2FY25 results. The auto major’s stock fell as much as 10.88%, reaching ₹10,352.70 apiece on the BSE. Despite the sharp decline, Bajaj Auto has delivered impressive returns over the past year, rallying over 53% year-to-date (YTD) and providing multibagger returns of more than 101% in the last year.

Q2 Results Overview: Bajaj Auto reported a standalone net profit of ₹2,005.04 crore for the second quarter of FY25, marking a 9.2% increase from ₹1,836.14 crore in the same period last year. The company's total revenue from operations also saw significant growth, rising by 22% year-on-year (YoY) to ₹13,127.47 crore from ₹10,777.27 crore.

In terms of profitability, Bajaj Auto's EBITDA increased by 24.4% YoY to ₹2,652.4 crore, with the EBITDA margin improving slightly by 40 basis points to 20.2% compared to 19.8% in the year-ago period.

However, despite these positive financials, the company faced challenges due to lower Average Selling Price (ASP) and muted two-wheeler retail growth, particularly in the 125cc category, which impacted investor sentiment.

Market Reactions and Analyst Views: The decline in Bajaj Auto's share price has sparked differing opinions among analysts:

• Emkay Global Financial Services downgraded Bajaj Auto from ‘Reduce’ to ‘Sell,’ citing lower ASP and market share loss in the two-wheeler segment. They revised their target price to ₹9,500 per share, implying an 18% downside from the current price.

• Citi also maintained a ‘Sell’ rating on the stock, with a more bearish target of ₹7,800 per share, suggesting a 32% potential downside. The foreign brokerage highlighted a slight miss in ASPs and gross margin, which contributed to their cautious stance.

On the other hand, some analysts remain bullish:

• Nuvama Institutional Equities maintained a ‘Buy’ rating on Bajaj Auto and raised their target price to ₹13,200, citing the company’s growing presence in the electric/CNG vehicle market. Nuvama projects a 12% revenue CAGR and a 15% EBITDA CAGR over FY24–27, with an average Return on Equity (RoE) of approximately 36%. They believe the company's healthy outlook justifies a P/E upgrade.

Technical Analysis: From a technical perspective, Bajaj Auto shares have tested their 100-Day Moving Average (DMA) at ₹10,328 following the sharp fall. According to Milan Vaishnav, founder of ChartWizard FZE and Gemstone Equity Research, the stock appears to be in a mildly oversold zone and may be forming a base. He advises traders to add Bajaj Auto shares in small quantities with a stop loss below ₹10,000. He sets the stop levels between ₹9,800 and ₹10,000.

Key Takeaways:

• Bajaj Auto reported a 9.2% increase in net profit for Q2FY25 and 22% growth in revenue.
• Despite positive results, concerns over lower ASP and market share loss in the 125cc two-wheeler segment led to a sharp decline in the stock price.
• Analysts are divided: some see further downside potential, while others maintain a positive long-term outlook due to the company's growing presence in the electric and CNG segments.
• Traders are advised to approach cautiously, with technical indicators suggesting the stock is in an oversold zone.

Conclusion: The sharp fall in Bajaj Auto shares after its Q2 results has created mixed reactions in the market. While some brokerages remain cautious due to challenges in the two-wheeler segment, others are optimistic about the company's long-term prospects, particularly in the electric and CNG vehicle markets. Investors should weigh the short-term volatility against the company’s future growth potential when making decisions.