Two-wheeler manufacturer Bajaj Auto delivered a slight beat with its Q3 earnings powered by its electric vehicle division, which made up 45 percent of its total revenue in the quarter gone by, up from 30 percent last year. Bajaj Auto's EV business also turned profitable in Q3, which along with its positive Q3 earnings impressed brokerages.

Investors also reacted positively to the company's Q3 numbers, lifting the stock nearly 5 percent higher in early trade on January 29. At 09.22 am, shares of Bajaj Auto were trading at Rs 8,745.15 on the NSE.

Bajaj Auto posted an 8 percent year-on-year rise in consolidated net profit for Q3 FY25, at Rs 2,196 crore, surpassing Moneycontrol's estimated Rs 2,155 crore. Consolidated revenue from operations also grew 8 percent on year to Rs 13,169 crore, beating Moneycontrol's poll expectations of Rs 13,016 crore.

The EV segment delivered around 100,000 units in Q3. The company has doubled its market share in the electric two-wheeler space and tripled it in the electric three-wheeler category compared to last year. The segment also reported a marginally positive EBITDA, marking a turnaround from losses in the previous year.

However, despite the EV segment's rapid growth, Bajaj Auto lost some ground in the highly competitive entry-level motorcycle segment. Brokerage firm Citi flagged this as a concern, noting that the company ceded market share in this high-volume category. Axis Securities echoed similar concerns, highlighting a 100-basis-point market share decline in the first nine months of FY25, despite new model launches. As a result, Axis Securities maintained its ‘sell’ rating while lowering its target price by nearly 6 percent to Rs 7,550.

Aside from these blips, brokerages as well as the management have a rather optimistic outlook for the company. The management has provided a positive volume outlook for the next three-six months, with export growth at over 20 percent and domestic growth of 6–8 percent.

Furthermore, Bajaj Auto has announced plans to enter the e-rickshaw segment by the end of Q4, to target an addressable market of 45,000 units per month. Nuvama Institutional Equities expects Bajaj Auto's domestic three-wheelers to a 4 percent CAGR over FY25–27 led by replacement demand and improved business activity.

"Moreover, we expect a 13 percent CAGR in three-wheeler exports (including quadricycles) due to better demand in Latin America and ASEAN, entry of quadricycles in Egypt, and a low base," Nuvama added. The brokerage has a 'buy' call on the stock with a target price of Rs 10,700.

These triggers combined with the solid growth of the company's EV segment paint a positive growth trajectory for the two-wheeler maker. However, Citi believes the rich valuations of the stock prevent the brokerage from turning more constructive over the stock. Likewise, Citi retained its 'sell' call on the stock with a price target of Rs 7,900.