Eicher Motors shares trade near its all-time high; is now a good time to buy?

On Friday, the Royal Enfield motorcycle manufacturer posted a 54.7% increase in net profit for the quarter that ended September, totaling ₹1,016 crore. Owing to the growing demand for premium motorcycles, the company’s second-quarter earnings rose more than expected, mostly due to good sales. Eicher Motors share price today opened at intraday low level of ₹3,586.05 apiece on BSE. 

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According to technical analysts, Eicher Motors stock price’s trend is positive, and the stock can rally upto ₹3,700/3,850. 

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During the July-September quarter of the previous fiscal year, the automaker declared a net profit after tax of ₹657 crore. According to a regulatory filing from Eicher Motors, the company’s overall income from operations increased to ₹4,115 crore for the September quarter from ₹3,519 crore in the corresponding period last year. It was the company’s highest-ever performance in terms of quarterly revenues, profits, and sales, it said.

The premium motorcycle sales segment Royal Enfield revenue increased by 13%. Compared to 2,03,451 motorcycles sold during the same period of the previous fiscal year, a total of 2,29,496 motorcycles were sold under this division in the second quarter.

Also Read: Eicher Motors Q2 Results: Net profit up 55% YoY to ₹1,016 crore

“At the halfway mark for the financial year, we have registered remarkable performance both at Royal Enfield and VE Commercial Vehicles,” Eicher Motors Managing Director Siddhartha Lal said in a statement.

Let’s see what the brokerage has to say about the Q2 results and their evaluations and rating for Eicher Motors stock:  

Despite a better-than-expected Q2, global brokerage house, Jefferies maintains a ‘Buy’ call on Eicher Motors and sees possibilities for a re-rating, while Morgan Stanley maintains an ‘Equal-weight’ rating, according to media reports.

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Nuvama Institutional Equities 

In line with predictions, Eicher reported robust Q2FY24 revenue/EBITDA increase of 17%/32% YoY to ₹4,110 crore/ ₹1,090 crore. Over FY23–26E, the brokerage project’s a revenue CAGR of 10%, driven by new product development and network expansion. In the face of more intense competition, recent releases like the Meteor 650cc and Himalayan 450cc, together with the next lineup, have the ability to accelerate growth. The firm has maintained its rating after raising its target price by 8.5%.

“We reckon the earnings CAGR would be 18% led by expanding scale, better net pricing and increasing sales of accessories. We argue EIM would be largely unaffected by the EV transition over the next few years as the acceptance of EV cruisers shall be gradual. Retain ‘BUY’ with a Sep-24E TP of ₹4,200 (earlier Mar-24E TP of ₹3,870),” the brokerage said.

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The brokerage stated that Eicher Motors surpassed forecasts in 2QFY24, achieving a consolidated EBITDA margin of 26.4% (compared to an expected 25.6%). Despite a poorer mix, the full impact of 1Q price increases and RM cost savings was mitigated. Royal Enfield’s introduction of the Himalayan 452cc on a new platform has increased rivalry among premium bike manufacturers.

“We upgrade our FY24E/FY25E SA EPS by 6%/3%, to factor in margin expansion due to benign RM costs and higher other income. However, we maintain our estimates for VECV. We reiterate our Neutral rating on the stock with a target price of ₹3,800 (premised on Sep’25E-based SOTP),” the brokerage said. 

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Updated: 13 Nov 2023, 11:04 AM IST