Eicher Motors rises 3% post Q2 results; should you buy, sell or hold?

Shares of Eicher Motors climbed 2.7 per cent to Rs 3,676.25 on the BSE on Monday after the Royal Enfield manufacturer posted healthy September quarter results.

Its consolidated net profit increased by 55 per cent year-on-year (Y-o-Y) to Rs 1,016 crore, while total revenue from operations rose to Rs 4,115 crore in Q2FY24 as against Rs 3,519 crore in the year-ago period. 

Despite the competitive pressure, the company posted a healthy volume growth of 10.4 per cent Y-o-Y and marginally on sequential basis to 248,831 units which was supported by festive period and shift towards premium motorcycles.

It was the company's highest-ever performance in terms of quarterly revenues, profits and sales, it said.

At 11:50 AM, the shares were ruling 1.8 per cent higher at Rs 3,643 as against 0.49 per cent dip in the benchmark S&P BSE Sensex. 

Also Read: Eicher Motors Q2 net profit rises 55% to Rs 1,016 cr on robust sales

Here's how brokerages interpret result:

Motilal Oswal Financial Services | Neutral | Target: Rs 3,800

The company saw a growth of 13-14 per cent during the festival period. This growth was evenly spread across all regions. The Classic 350 saw the highest growth during the festive period. Hunter volumes also grew on the high base of last year. EIM expects this growth momentum to sustain going forward.

Despite challenging situations in export markets, Royal Enfield has been able to protect its market share at 8 per cent/9 per cent/9 per cent in America/APAC/EMEA.

We are building in ~11 per cent volume CAGR for RE over FY23-25, resulting in the monthly run rate increasing to ~78k/86k for FY24/25E. This, coupled with stable commodity prices, should help maintain steady margins and drive an earnings CAGR of 14 per cent over FY23-25E.

Religare Broking | Buy | TP: Rs 4,202

Eicher has a strong foothold in the premium 250+CC 2-Wheelers segment with a market share of ~33 per cent. The company would also focus on scaling up its international business while a rise in rural participation would aid in top line growth gradually. 

Industrial demand and governments push towards developing rural infra and improving urban infra as well as its plan to leverage its Stark Future investment toward EV would benefit the company's commercial vehicle segment which would further aid in top line growth.

We remain positive on the growth prospect of the company and have estimated its revenue/EBITDA/PAT to grow at a CAGR of 15.3 per cent/19.3 per cent/23.3 per cent over FY23-25E. We value the company at a PE multiple of 26x on FY25E EPS.

Nuvama Institutional Equities | Buy | TP: Rs 4,200

Earnings CAGR is expected to be higher at 18 per cent, led by rising scale, better net pricing, and increasing sales of accessories. We argue EIM would be largely unaffected by the electric vehicle (EV) transition over the next few years as acceptance of EV cruisers shall be gradual. Maintain 'BUY' with a TP of Rs 4,200, based on 27x Sep’25E P/E for the 2W business and 20x Sep’25E P/E for the CV business.

ICICI Securities | Buy | TP: Rs 4,074

Eicher Motors' Q2FY24 standalone Ebitda margin at 27.9 per cent was up ~200bps QoQ, and at a 19-quarter high. Improvement in the margin was driven by gross margin improvement with benefit of price hikes taken at Q1FY24-end, better mix, and favourable commodity prices.

We are building in ~0.94 milllion/1.03 million units for FY24E/FY25E with Ebitda margin of ~27 per cent, to arrive at a revised target price of Rs 4,074.