The one-hour Shubh Muhurta trading session will take place on the evening of October 24. During the Lakshmi Pujan day, which is considered the main event of Diwali, the stock market opens up for investors to grab opportunities in the equity and derivatives segment. With that being said, Royal Enfield manufacturer Eicher Motors is likely to be a hot pick in the upcoming Muhurat trading. Eicher is the market leader in the 250 cc premium motorcycle segment with a market share of over 85%.
Its two-wheeler models are sold under the Royal Enfield (RE) brand, such as Classic, Meteor, etc. In addition, the auto major has a presence in the CV space (6.6% FY22 market share) through a joint venture with Volvo ie VECV. (EML holds 54.4% stake). Currently, Eicher has a strong net cash positive balance sheet with healthy return ratio metrics.
In addition, the company has a strong track record of paying Dividend to its shareholders from their profits. In FY22, the company paid an overall equity dividend of 2,100% 21 per equity share.
in present Market Price, Eicher’s dividend yield is 0.6%. Eicher shares closed on Friday 3,485 each fell 0.4% on the BSE. The market cap of the company is approx. 95,299.32 crore.
from its 52-week low of 2,110 each, which was recorded on March 7, 2022, has seen Eicher shares rise over 65% on Dalal Street. Year-to-date, shares have jumped more than 28%. As compared to the last Muhurat trading hour which was held on November 4, 2021, Eicher shares have gained almost 31% so far.
According to ICICI Direct, addressing the customer’s need for an affordable RE product that is easy to maneuver, EML has recently launched the Hunter 350 at an ex-showroom price. 1.5 lakh/unit. Domestically, with the Hunter 350, EML is looking to tap first time buyers and upgrade from the 100 cc+ segment and 125 cc segment as its addressable market, with a market size of ~32 lakh units. (RE sales stand at 5.2 lakh units in FY22) Internationally, the addressable market size is pegged at ~10 lakh units (RE sales at 0.8 lakh).
In the first half of FY23 (April to September), Eicher recorded total Royal Enfield sales of 3,94,969, up 60% over 2,47,067 Royal Enfield sales seen in the same period last year. Further, its VECV sales grew by 67.6% to 35,085 units between April and September 2022 as compared to 20,940 units sold in the April-September 2021 period.
In its note, ICICI Direct said, “With this launch, RE reported its highest monthly dispatch in the recent past with September 2022 wholesales at 82,097 units, up 17.1% MoM. With continued focus on its rebalancing strategy. With, with minimal EV exposure in near future, shift in consumer preference towards premium motorcycles, and good response to Hunter 350, we expect RE sales volume to grow at a CAGR of 25% in FY 2012-24. “
Further, the note said, “With operating leverage gains and a decline in key raw material prices (primarily metals and plastics), margins on EML have seen an improvement of 26.1%, resulting in an improvement in FY24E ROCE till date is at ~21%. It is currently trading at affordable.Valuation of ~28x P/E on FY24E amid high double digit growth prospects. EML to CV through its JV with Volvo i.e. VECV Cyclical buoyancy in space would also benefit.”
ICICI Direct recommends buy Eicher shares in the range of for a target price of 3300-3480 each 4,170 each.
On October 24, Muhurta trading in equity and derivatives segment on BSE and NSE will start from 6:15 pm to 7:15 pm. The pre-opening session will start at 6:00 PM and end at 6:08 PM.
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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