Eicher Motors Q2 Review: Shares Fall As Analysts Flag High Valuation After Q2 Results
Multiple tailwinds viz demand recovery, new product launches, limited competition, and easing commodity costs will aid the company
Shares of Eicher Motors Ltd. fell after analysts raised concerns about the high valuation after the second-quarter results.
Multiple tailwinds such as two-wheeler demand recovery, industry premiumisation, new product launches, limited competition, and easing commodity costs will aid the owner of the Royal Enfield brand in the coming years, analysts said.
Consolidated net profit rose 76% year-on-year to Rs 656.9 crore in the quarter ended September on a low base and helped by higher sales of newly launched Hunter 350 model.
"Rich valuations still keep us from turning more positive at this juncture, even as signs of recovery in demand for premium bikes are visible in the domestic market," Axis Capital said in a report.
Analysts also said that higher sales of Hunter 350, launched to address affordability concerns of premium bikes, adversely impacted the overall operating margins. But as the model is bringing in new customers with little cannibalisation, the overall sentiment remained positive, they said.
Shares of Eicher Motors eased 3.27% to Rs 3,580 apiece as of 10:40 a.m., while the benchmark Nifty 50 gained 1.46% on the NSE.
Of the 47 analysts tracking the company, 33 maintain 'buy', seven suggest 'hold' and seven recommend 'sell', according to Bloomberg data. The average of 12-month consensus price target implies an upside of 5.4%.
Here’s what analysts said about the company’s Q2 results:
Higher sales of Hunter 350 and lower exports hurt operating performance in the quarter.
Benefits of easing commodity costs to start reflecting from the third quarter.
Easing supply chain pressures, continued product expansion and ramp-up in exports to aid recovery.
Waiting to see Hunter’s impact on volumes, average selling price and margins.
Reiterate ‘buy’ rating with a target price of Rs 4,150, a potential return-on-investment of 13%.
Expect earnings per share to almost treble over FY22-25E with limited competition, low EV risk, demand recovery and new product launches.
See industry two-wheeler volumes rising with stronger rebound in urban and replacement demand for premium motorcycles.
Profitability dipped in the second quarter due to weaker product mix but expect improvement in coming quarters.
Maintain ‘buy’ rating with a revised target price of Rs 4,350, implying an upside of 18%.
Successful Hunter launch along with higher demand for premium motorcycles to drive double-digit volume growth, which has been missing over the last 4 years.
Expect average selling price to increase with pick-up in exports.
Selective price hikes, lower commodity prices and bigger scale of operations to aid margin improvement.
Revised target price to Rs 3,350 from Rs 2,850 but maintain ‘reduce’ on rich valuations.
Volume growth in FY23 expected to be robust at 40% led by new products and strong exports.
Expect Ebitda margin to expand to 26.9% in FY25 and 24.7% in FY23 from 21.1% in FY22 on cost savings, better scale and pricing.
Retain ‘buy’ with price target of Rs 4,100 per share, an upside of 10.8%.