Bajaj Auto shares slide 3% after CLSA downgrades to ‘sell’ on valuation concerns

Shares of Bajaj Auto saw a 3 percent decline, trading at Rs 7,081 during the morning session on January 17. This downturn followed a downgrade by the domestic brokerage firm CLSA, which shifted the stock rating from ‘underperform’ to ‘sell,’ citing concerns about valuation.

Analysts at the firm have said that the stock is overvalued given the recent rally the counter witnessed. Further, the brokerage firm has turned cautious as valuations are pricing in double-digit volume growth over the next few years, which seems unlikely.

At 10:37 am, the stock was trading at Rs 7,131, down 2.3 percent from the previous close on the NSE. In 2023, Bajaj Auto was the second-best performer on the Nifty, gaining almost 98 percent, trailing only another automobile major — Tata Motors.

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CLSA has also revised its target price to Rs 6,315. This implies a downside of 13.4 percent from the previous close of Rs 7,293. They have also cut the two-wheeler and three-wheeler major’s volume estimates by 5 percent and 6.5 percent for FY24, and FY25, respectively.

Earlier, on January 8, the Bajaj Auto board approved a Rs 4,000-crore share buyback at Rs 10,000 per share, at a premium of 43 percent. Bajaj Auto will buy 40 lakh shares through the tender route, or 1.41 percent of the total outstanding shares.

This was Bajaj Auto’s second share buyback in as many years. The auto major had in July 2022 purchased shares worth Rs 2,500 crore from holders at Rs 4,600 a unit.

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