Eicher Motors stock surges as profit beats estimates; brokerages divided

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Shares of Eicher Motors gained nearly 6 per cent on Friday’s trade following its Q1 results. The company clocked ₹1,101.46 crore consolidated net profit for the quarter ended June 2024, almost 20 per cent increase from ₹918.34 crore net profit in the corresponding quarter last year.

Eicher’s total motorcycle sales stood at 2,27,736 units in Q1 FY25 compared to 2,25,368 units in June quarter of FY24.

The stock closed higher by 5.68 per cent at ₹4,837 on the NSE. On the BSE, the stock ended 5.55 per cent positive at ₹4,832.85. 

Brokers’ take

Despite the company’s performance surpassing Street expectations, most brokerages see pressure going forward and have reduced their target price for the stock.

Global investment advisory firm JP Morgan has maintained Neutral stance on Eicher Motors with a revised target price of ₹4,435 from ₹4,230, implying an 8 per cent downfall from current price.

Nuvama Institutional Equities said Royal Enfield (RE) volumes in Q1 inched down by 1 per cent in domestic market against industry growth of 20 per cent.

Eicher’s EBITA was slightly above Nuvama’s estimates owing to better realisation and mix. The brokerage expects underperformance to persist, with volume CAGR of 3 per cent in the domestic market over FY24– 27, as launches are in niche categories with limited volume potential, and with increased competitive intensity from Bajaj-Triumph, HeroHarley, TVS Motor (Ronin), Honda and Classic Legends (Jawa).

Maintaining ‘Hold’ call on Eicher, the brokerage kept the target price unchanged at ₹4,600.

Analysts at PL Capital have retained ‘Buy’ call on Eicher at the target price of ₹5,335. They mentioned that Eicher’s management is optimistic on delivering high single digit growth in FY25 aided by robust festive sales as well as new launches.

PL has estimated Eicher’s international volume to grow at a CAGR of 14 per cent over FY24- 26, given the encouraging response towards new launches and expansion of its geographic presence.

Axis Securities though maintained ‘Buy’ rating on the stock, revised the target price downards to ₹5,060 from ₹5,135 earlier. The brokerage expects RE volumes to grow mid-single digits in FY25/26 and standalone Revenue/EBITDA to grow higher at 13 per cent each CAGR over FY24-26.

ICICI Securities has maintained ‘Add’ rating with DCF-based revised target price of ₹4,827 (earlier ₹4,892), signalling little headroom for the stock from current level.

However, global brokerages such as Jefferies, UBS and Goldman Sachs appeared to be more bullish as they maintained their ‘Buy’ ratings with target prices of ₹5,550, ₹5,820, and ₹5,600, respectively.

Sell call

Motilal Oswal expects margins to largely remain stable from hereon as any benefit from improving mix is likely to be offset by the rising competitive intensity. It has maintained ‘Sell’ call with a target price of ₹3,920.

Elara Securities also noted that the aggressive pricing by competitors would limit RE’s pricing power in the medium term. The brokerage has reiterated ‘sell’ with a revised target price of ₹4,417 from ₹4,306.

Emkay Global has retained ‘sell’ call at an increased target price of ₹3,400 from ₹3,250.