Eicher Motors share price trades near its all-time high post Q2 results; what should investors do?

Motorcycle manufacturer Royal Enfield on Friday posted a 54.7% increase in net profit for the quarter ended September, amounting to 1,016 crore. Due to the growing demand for premium motorcycles, the company’s second quarter earnings rose more than expected, mainly due to good sales. Shares of Eicher Motors today opened at an intraday low 3,586.05 apiece on BSE.

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According to technical analysts, Eicher Motors stock price 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 crores. According to a regulatory filing by Eicher Motors, the company’s overall revenue from operations increased to 4,115 crore for the September quarter from 3,519 crore in the corresponding period last year. This was the company’s highest ever performance in terms of quarterly revenue, profit and sales, he said.

Revenue of Royal Enfield’s premium motorcycle sales segment grew 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 segment in the second quarter.

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

“At the halfway point of the financial year, we have registered an impressive performance 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 ratings for Eicher Motors stock:

Despite a better-than-expected Q2 global brokerage, 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 projections, Eicher reported strong Q2FY24 revenue/EBITDA growth of 17%/32% YoY to 4,110 crore/ 1,090 crore. Over FY23-26E, the brokerage projects revenue CAGR of 10%, driven by new product development and network expansion. Given the tougher competition, recent releases such as the Meteor 650cc and Himalayan 450cc, along with the next line-up, have the potential to accelerate growth. The firm maintained its rating after raising its target price by 8.5%.

“We estimate the earnings CAGR to be 18% led by increased scale, better net pricing and increased sales of accessories. We argue that the EV transition would not significantly affect EIM in the next few years as EV boaters will be gradually adopted. Hold ‘Buy’ with TP Sep-24E of 4,200 (March-24E TP earlier of 3,870),” the brokerage said.

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

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

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Disclaimer: The above opinions and recommendations are the opinions and recommendations of individual analysts, experts and brokerage firms, not of the Mint. We encourage investors to check with certified experts before making any investment decision.

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Updated: 13 November 2023, 11:04 AM IST

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