Brokerage and research firm Nirmal Bang remains positive about Eicher Motors’ business prospects, owing to healthy growth and model launches. It expects new launches and esports to propel the next phase of growth for the auto maker.
“We are building at a Revenue/EBITDA/EPS CAGR of 19%/32%/31% over FY22-25E. However, the stock is up ~50% in the last 6 months; Following this run-up, we see limited upside potential and believe that the current valuation has impacted the company’s positive business prospects and thus we have a cautious outlook on Eicher,” the note said.
The brokerage house has maintained its accumulation rating on the shares of Eicher Motors with a target price (TP) of 3,678 each. auto stock. is trading near its all-time high It was hit at Rs 3,512 per share on BSE on August 25, 2022.
It expects Royal Enfield (RE) to cross FY19 peak volumes of 826k in FY19, largely on the back of pick-up in exports and also expects Eicher Motors exports Will be over 19% CAGR on FY22-25E, aided by entry in new. Market share gains in the market and existing markets.
Eicher Motors has a market share of around 8% in the global mid-sized MC market with a volume of around 1 million units per annum, resulting in a long runway for growth. “In terms of margins, despite a substandard product mix, we expect operating leverage to be shielded by an increasing share of profit and exports, thus limiting the adverse impact on margins. Currently, the company is operating at ~60% utilization, and with volumes coming back, we expect margins to increase by 510 bps in FY 2012-25E,” Nirmal Bang said.
The brokerage has also noted the increasing competitive intensity in the domestic market. Honda (Hness CB350) and TVS (Ronin) have already launched competing products, while Bajaj-Triumph and Hero-Harley Davidson may launch their products in the next 1-2 years. “However, historically, we have seen Royal Enfield protecting its market share amidst increasing competitive intensity,” it said.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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