2 weeks Ago
Eicher Motors Ltd. shares will be in focus during Thursday’s trading session after the Royal Enfield parent reported September quarter earnings that missed CNBC-TV18's estimates on all parameters. NSE Despite this miss, some brokerages have upgraded both their ratings and price targets for Eicher Motors.
Brokerage firm Nuvama said that Eicher Motors' second-quarter EBITDA remained flat year-on-year at ₹ 1,090 crore, falling short of the estimated ₹ 1,190 crore due to higher marketing costs. Net profit grew 8% year-on-year to ₹ 1,100 crore, in-line with expectations, aided by higher other income. Royal Enfield’s domestic sales edged down 1% year-on-year in the first half of the financial year 2025.
However, the brokerage expects a strong recovery in the second half, with an anticipated 12% year-on-year increase driven by strong festive demand, a sharper focus on key models (Classic, Bullet), and a push for new products and marketing. Accordingly, Nuvama has raised its revenue and earnings per share forecasts for FY25–27 by up to 8% and 6%, respectively. The brokerage is now building a compound annual growth rate (CAGR) of 9% for revenue and 11% for earnings over FY24–27E.
Nuvama has upgraded the counter to 'Buy' from its previous 'Hold' rating, with an increased price target of ₹ 5,500 from ₹ 4,500 per share. The revised price target implies a potential upside of 20% from Wednesday's closing levels of Eicher Motors. Foreign brokerage house Jefferies has reiterated a ‘Buy’ rating on Eicher Motors, with a price target of ₹ 5,500 per share.
Q2 EBITDA remained flat year-on-year but came in 8% below estimates due to lower-than-expected Royal Enfield margins. Royal Enfield volumes are showing signs of improvement, and the brand is positioned to benefit from the premiumisation trend in the two-wheeler market. The most challenging phase of competition is now behind, the brokerage said.
Morgan Stanley maintains an 'Underweight' rating on Eicher, with a price target of ₹ 3,655 per share, citing the company's weak Q2 earnings, with EBITDA falling 8% short of estimates. The automotive company is now focussing more on growth than margins, which is seen as a sensible strategy; however, its valuation supports the Underweight stance, it said. Despite a favorable product mix, the EBITDA margin has declined on a year-on-year basis.
Given a better strategy, Nomura has upgraded the stock to 'Neutral' from its earlier rating of 'Reduce'. The brokerage has also raised the price target to ₹ 4,391 per share. Q2 margins missed expectations due to growth-focused investments.
Nomura said that it is encouraged to see Royal Enfield’s shift in stance to drive the volume growth, and anticipates that market share loss may now be more gradual. The foreign brokerage has raised Royal Enfield volume estimates for FY25/26 by 3-5% but lowered margin estimates for FY25-27 by 20-40 basis points. Out of the 40 analysts that have coverage on Eicher Motors, 20 of them have a 'Buy' rating, while 10 each have a 'Hold" and a 'Sell' recommendation.
Shares of Eicher Motors Ltd. ended nearly 3% lower on Wednesday at ₹4,598.80.
The stock has risen 14% so far in 2024..
