Uncertainty over rare earth minerals hurting prospects of its electric vehicles business, sluggish domestic demand and a lack of new launches are to be blamed. The rupee's depreciation benefitted the automaker's exports, but more favourable triggers are needed to reverse the stock's underperformance.

Against this backdrop, the September quarter (Q2FY26) results had some bright spots. Still, overall, that may not be too exciting for investors.

Revenue increased by 14% year-on-year to ₹14,922 crore aided by double-digit growth in exports—a strong show in premium motorcycles and three-wheelers. Exports were slightly over 40% in sales volumes for Q2FY26.

Overall volumes grew 6% to 1.29 million units and net revenue/unit increased 7% to ₹115,307, led by exports that grew 24% thanks to broad-based growth across regions. Domestic volumes were muted given the decline in two-wheelers.

Ebitda increased 15% to ₹3,052 crore.

The management expects domestic motorcycle growth rate to improve by 6-8% in H2FY26 buoyed by the good and services tax (GST) rate cuts. The Pulsar portfolio delivered peak performance in Q2, with a market share decline of recent quarters arrested by the end of Q2, the management said.

Bajaj Auto has now started seeing market share gains in the key 125cc+ and 150cc+ sports segments reversing a falling trend that was a sore spot for investors. It expects to outpace industry growth in the 125cc+ segment.

The impact of GST cuts was visible in a rising preference for higher-end models versus base variants, said the company.

Model launches are also planned. The Pulsar will see three new introductions in December, March, and May. A new non-Pulsar brand is planned for FY27. The management is recalibrating Triumph and KTM models for the under-350cc segment to benefit from the lower GST rates. A new Chetak variant is set for launch next year.

While its industry peers grew 14% in their exports to top 30 country markets—these account for 70% of total exports—Bajaj Auto grew at twice that rate.

Asia and Africa reported double-digit growth, driven by Sri Lanka, the Philippines, and East Africa, while Nigeria remained steady. Macroeconomic challenges in Nigeria have hurt sales there.

"While a recovery in exports and a healthy ramp-up of Chetak and (three-wheelers) are key positives, market share losses in domestic motorcycles, particularly in its crucial 125cc+ segment, remains the key concern," said a Motilal Oswal Financial Services report dated 8 November. Bajaj lost 160 basis points (bps) market share in FY25 to 16.6% in motorcycles and further lost 60 bps share to 16% in H1FY26, it added. A basis point is one-hundredth of a percentage point.

Overall, Bajaj's margin rose 20 bps to 20.5% aided by favourable currency and improved product mix. While, prices of inputs materials such as aluminium, platinum, and rhodium are rising, Bajaj has not made any price hikes. It is confident of offsetting commodity prices with currency tailwinds.

Given the positives of Q2FY26, DAM Capital has upgraded earnings per share estimates by 5.5% and 5% for FY26 and FY27, respectively.

The worst is behind for Bajaj Auto as exports growth support performance but acquisition of niche brand KTM is the biggest medium-term overhang for the stock, said a DAM report dated 8 November. The stock is trading at FY27 price-to-earnings of around 23x, showed Bloomberg data.