Jefferies is bullish on these two 2-wheeler makers, sees up to 23% upside

Analysts at Jefferies, believe that the time is ripe to buy Eicher Motors given alleviating competitive concerns, along with tailwinds of 2W demand recovery, industry premiumization and exports.

Shares of Eicher Motors, the listed parent company of Royal Enfield, and TVS Motor Company were in focus and rallied up to 4 per cent on the BSE in Tuesday’s intra-day trade after overseas brokerage firm Jefferies said it prefer these two stocks over Bajaj Auto and Hero MotoCorp in two-wheelers (2W) segment.

Shares of Eicher Motors rallied 4 per cent to Rs 3,518.95 in intra-day trade today. Analysts believe time is ripe to buy Eicher Motors given alleviating competitive concerns, along with tailwinds of 2W demand recovery, industry premiumization and exports.

Rising competitive concerns have weighed on Eicher Motors in 2023, resulting in stock lagging Nifty Auto Index by 24 per cent. Despite fresh competition from Hero-Harley and Bajaj-Triumph bikes, web search trend and the brokerage firm said it channel checks suggest limited impact on Eicher Motors.

“We believe Eicher Motors has strong tailwinds of 2W demand recovery, industry premiumization and potential to grow exports; however, we had earlier pushed Eicher Motors lower in our pecking order due to rising competition. We believe the risk to Royal Enfield's market share is now alleviating,” analysts at Jefferies said in its stock report.

The overseas brokerage firm has pegged a price target of Rs 4,150 for Eicher Motors, indicating an upside of up to 23 per cent when compared with its previous day's close.. 

Shares of Eicher Motors had hit a 52-week low of Rs 2,835.95 on March 28, 2023. It touched a 52-week high of Rs 3,886 on November 1, 2022.

Meanwhile, shares of TVS Motor hit a new high at Rs 1,540, up 2 per cent on the BSE in intra-day trade today. The stock surpassed its previous high of Rs 1,532 touched on September 20, 2023. In past one month, it has rallied 15 per cent, as compared to 1.6 per cent rise in the S&P BSE Sensex.

TVS Motor is positive about the performance of the Premium motorcycle segment and scooter segment with improved urban demand. The improving road infrastructure and economic environment with current mass transit systems will further drive the demand for mobility for the masses. This demand is today best served by the 2-wheeler segment, making its fundamentals very attractive considering a resurgent India, the company said in its FY23 annual report.

Export of two-wheelers is likely to see a growth during the year after the weak performance in 2022-23. The Africa market is expected to perform better in 2023-24 recovering from the global slowdown and with moderation of inflation. Expansion programs in LATAM, ASEAN and Middle East will add further momentum. Falling freight rates and better availability of containers are likely to support exports from India this year, the company said.