Eicher Motors down 9% from day's high on profit booking; analysts bullish

Shares of Eicher Motors slipped 5.5 per cent to Rs 3,472 on the BSE in Monday's intra-day trade amid profit booking after the company reported volume growth of 17.1 per cent month-on-month (MoM) at 82,097 units in September. The stock fell 9 per cent from its record high level of Rs 3,800, touched earlier today.

However, despite today's fall, the stock of Eicher Motors has outperformed the market by surging 25 per cent in the past three months, as compared to 7 per cent rise in the S&P BSE Sensex. In the past six months, it has surged 40 per cent as against 4 per cent decline in the benchmark index.

Eicher Motors is the listed parent of Royal Enfield (RE), global leader in the middleweight motorcycles segment (250cc - 750cc). Royal Enfield volume prints for the month September came in stellar, and were at a multi-year high in the recent past. The two wheelers (2Ws) segment demand hinges on the festive season, which seems to have received an encouraging start.

Analysts at Prabhudas Lilladher expect Hunter volumes to increase further in October 2022 on account of festive season, and growing acceptability. Going ahead, the brokerage firm expects more model launches targeting aspirational first-time RE buyers which will drive volume growth. Furthermore, RE’s export momentum remains strong, and should sustain, with success of ‘J platform’ compliant with Euro5.

"Eicher Motors benefiting from the premiumisation and limited disruption from electric vehicles (EVs) for most of this decade. In our view, most of the incremental value will accrue to new entrants and in the EV business," analysts at BNP Paribas said in a India Auto sector report. The brokerage firm has a ‘buy’ rating on Eicher Motors with a target price of Rs 4,215.

Key downside risks to our SoTP-based target price include entry of competitors in the cruiser bike segment at a competitive price; Shift in consumer preference away from cruiser bikes to sports or other bikes; weakening of overall macro-economic environment leading to weak consumer sentiment; and sudden weakening of demand for commercial vehicles, especially medium duty trucks and buses, it added.