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Eicher Motors Hits 52-Week High As Analysts See Benefits From Higher Exports, Launches

Here’s what analysts have to say about Eicher Motors' Q1 FY23 results.

<div class="paragraphs"><p>Royal Enfield Hunter by Eicher Motors Ltd. (Source Company website)</p></div>
Royal Enfield Hunter by Eicher Motors Ltd. (Source Company website)

Shares of Eicher Motors Ltd. hit a 52-week high as analysts see the Royal Enfield motorcycle maker to be a key beneficiary of a revival in urban and replacement demand for two-wheelers.

A rise in exports, new launches and stabilising commodity costs will also aid its performance, analysts said in their post-earnings research reports.

Eicher Motors, on Wednesday, reported more than a twofold year-on-year jump in its consolidated net profit at Rs 611 crore for the quarter ended June. Sequentially, the earnings remained steady. The bottom line was aided by robust sales in international markets.

Revenue from operations rose to Rs 3,397 crore in the April-June 2022 period from Rs 1,974 crore in the year-ago period.

“Our international volumes continued to record consistent growth with more than 60% increase compared to the previous year. We have registered the highest ever quarterly revenue and Ebitda on the back of a record international sales volumes,” Siddhartha Lal, managing director at Eicher Motors, said.

On the BSE, the stock opened at Rs 3,256 apiece and then rallied to touch its 52-week high of Rs 3,265.95—a rise of 3.5% over its previous closing price.

On the NSE, the scrip opened at Rs 3,256, and then climbed to Rs 3,265.95, also a gain of 3.5% over its last close. Trading volume was almost five times the 20-day average for this time of day.

Opinion
Eicher Motors Q1 Results: Profit Meets Estimates Despite Subdued Sales

Here’s what analysts have to say about Eicher Motors' Q1 FY23 results.

CLSA maintained its ‘buy’ rating on Eicher Motors with a target price of Rs 3,763 apiece, implying an upside of over 19%.

The June-quarter results of Eicher Motors were better than its two-wheeler peers. “We expect continued improvement in volume across markets,” the research house said in a note. Eicher Motors is one of the top stock picks in the two-wheeler segment, it said.

  • DAM Capital analyst Chirag Jain upgraded the recommendation on Eicher Motors to ‘buy’ and assigned a target price of Rs 3,635 apiece.

  • Nirmal Bang Institutional Equities analyst Varun Baxi downgraded the stock to ‘accumulate’ and assigned a target price of Rs 3,466.

  • Dolat Capital Market analyst Abhishek Jain downgraded the recommendation to ‘accumulate’ and assigned a target price of Rs 3,483.

  • Asian Markets Securities analyst Mayur Milak downgraded the recommendation to ‘sell’ and assigned a target price of Rs 2,600.

  • Stewart & Mackertich Wealth Management analyst Amit Hiranandani downgraded the recommendation to ‘accumulate’ and assigned a target price of Rs 3,424.

Yes Securities

  • Gross margins surprised positively at 44%, partially offset by higher other expenses.

  • Margins expected to remain intact led by new launches that would drive higher volumes; most raw material inflation is passed on with price hikes, while product mix remains favourable.

  • Expects volumes to grow 22% CAGR over FY22-24 and upgrades FY23/FY24 consolidated EPS by 8% to reflect better gross margins.

  • Maintains ‘buy’, raises price target to Rs 3,707 from Rs 3,211 earlier.

Jefferies India

  • Royal Enfield faces limited incremental competition and the cruiser motorcycle segment is at low risk of electrification.

  • The company should benefit from revival in two-wheeler demand and is well-positioned to gain from industry premiumisation.

  • Strong pricing power amid big commodity inflation bodes well for margin.

  • Launch of Hunter 350 to expand customer base as it is comparatively lower-priced with starting price of Rs 1.5 lakh.

  • Sees EPS more than doubling over FY22-24 and multiple positives for Royal Enfield motorbike business, including recovery in two-wheeler demand, strong exports and limited competition.

  • The abnormal 35% fall in Indian two-wheeler demand over FY19-22 has created a favourable base for strong recovery.

  • Royal Enfield has shown strong pricing power amid big commodity inflation.

  • Retains ‘buy’, ups price target to Rs 3,700 from Rs 3,500.

JM Financial Institutional Securities

  • Volume for Q1 remained limited by chip shortages, while exports were strong with expanding distribution network.

  • The company has been consistently taking price hikes to offset raw material inflation; higher sales of accessories/spares supporting margins.

  • Maintains ‘sell’ on high valuations but raises price target to Rs 2,520 from Rs 2,400; higher-than-expected volume growth is a key upside risk.

Prabhudas Lilladher

  • Hunter 350 to bring new customers with attractive pricing and differentiated product features.

  • Expects export business to witness significant growth over next few years led by channel expansion and market share gains.

  • Higher scale of business due to easing supply chain issues may increase margin.

  • Maintains ‘buy’ with a target price of Rs 3,400 apiece, implying a return on investment of 6%.

Motilal Oswal

  • Easing supply-chain issues and continued expansion of the product portfolio will aid domestic recovery and ramp-up in exports.

  • Inquiries are good but conversion a tad weaker in the last 30-40 days but launch of the Hunter will aid conversion.

  • Higher share of exports and non-motorcycle sales along with stable commodity prices will drive margin improvement.

  • Maintains ‘buy’ with a target price of Rs 3,600 a share, implying potential profit of nearly 13%.