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Auto: Robust results, healthy growth outlook but raises concerns around cost pressures

ICICIdirect Research 08 May 2026 DISCLAIMER

It was a result heavy week on the Auto side. Volume growth across OEMs was above ~20% supported by tailwinds from GST rationalization and uptick in demand sentiments.
Going forward companies indicated continued positive demand across segments but expressed concern about near-term costs pressure on the commodity front and will try to mitigate it through partial pass thru of the same with price hikes.

Bajaj Auto: Reports peak revenues & resilient margins for the quarter

  • Total operating income for the quarter came, up ~32% YoY amidst 24% YoY growth in volumes with EBITDA margins at 20.8% (flat QoQ). PAT in Q4FY26 stood up 34% YoY while Blended ASP’s for Q4’26 stood at ₹ 1.11 lakh/unit (up ~3.6% QoQ).
  • Overall FY26 was a record-breaking year for Bajaj auto as net sales came up 17.4% YoY, with EBITDA margins at 20.5%, up 30 bps YoY and resultant PAT up 21% YoY.
  • EVs scaled sharply, contributing ~20% of domestic revenues, with both electric scooters and electric autos delivering double-digit EBITDA margins.
  • The cost environment has turned sharply inflationary entering FY27, with management indicating RM price hike of ~3.5–4% of revenue (ASP’s). While partial price hikes (amounting to 40% of the impact) have been taken, the company is prioritizing cost optimization and disciplined spending before resorting to further pricing actions.
  • According to the company while overall industry growth is expected to moderate in the near term to ~7–9% due to inflationary pressures (impact of ~200 bps on margins in Q1FY27E) and price hikes, the 150cc+ segment is growing significantly faster, and Bajaj is gaining share through its refreshed Pulsar portfolio.
  • Going forward robust export outlook, strong leadership in domestic EV segment and a differentiated product pipeline are expected to drive sustained growth for Bajaj Auto. With calibrated price hikes underway, we remain positive about medium to long term growth prospects at BAL maintain BUY rating on the stock & value it at ₹ 12,150 i.e. 27x P/E on FY28E EPS.
  • The company also announced buyback of 46.94 lakh shares for ₹5,633 crores at ₹12,000 each (tender offer route). It also announced a dividend of ₹150/per share

Mahindra & Mahindra: Healthy Q4FY26; Guides for mid-teen growth for SUV space in FY27E

  • On standalone basis, top-line for the quarter came in up ~26% YoY with automotive segment volumes growing ~21% YoY and tractor sales volume up ~36% YoY with corresponding EBITDA margins at 14.1% (down ~65 bps QoQ). Resultant PAT for Q4FY26 stood up ~53% YoY, supported by higher other income.
  • For FY26, Topline came in at ₹1.45 lakh crores, up 25% YoY, with EBITDA margins at 14.4%, (down 30 bps) and PAT at ₹15,639 crores (up 32% YoY).
  • M&M leads the SUV segment with a revenue market share of 24.5% in Q4FY26 (up 60 bps YoY). M&M also retains its market leadership in tractor space with highest ever market share as of FY26 at 43.6%.
  • Automotive segment EBIT margins were flat QoQ at 9.5% which includes eSUV contract manufacturing margins (core Auto EBIT at 10.4%), while Farm Equipment segment margins were steady at 19.4% (core tractor margins at 20.8%).
  • It guided for 10 new launches in the LCV domain over FY26-31E (increased the count by 7 models) and 10 new launches in the ICE-SUV domain (increased count by 6). It is also looking at 3 additional launches in the E-SUV domain taking the total launches count to 6 by FY31.  
  • SUV demand is expected to grow in the mid-to-high teens, supported by strong product pipeline & capacity additions. The farm segment is expected to grow at around ~5%, balancing high base effects with favourable rural drivers such as government spending and reservoir levels. The LCV segment is expected to grow at high single digits.
  • We maintain BUY rating and now value M&M at SOTP-based target price of ₹4,000 (14x FY28E standalone EV/EBITDA; 20% hold co. discount to investments, ₹300/share value accrued for its Electric PV arm).
View our research recommendation on Bajaj Auto Ltd Also explore more on Research page

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