Leading brokerages see a potential downside of up to 16% in Eicher Motors shares from the current trading prices. The analysts at two of three brokerages believe that the slowing retail growth and rising competition could impact the Royal Enfield maker in the next fiscal.
Eicher Motors shares dropped more than 3% to a low of ₹3,729.05 apiece on BSE in morning deals on Wednesday following bearish commentary by the majority of analysts.
Eicher Motors on Tuesday announced its financial results for the third quarter of FY24, reporting a 34.4% jump in net profit at ₹996 crore on a yearly basis. The company reported highest-ever revenue from operations of ₹4,179 crore, up by 12.3% year-on-year, for the quarter under review.
After the results, Morgan Stanley assigned an ‘underweight’ rating on the stock with a target price of ₹3,209 per share, implying a potential loss of 16% from the current trading price.
The brokerage mentioned that the company posted a good set of earnings for the third quarter, which were in line with estimates. However, it noted, “The slowing growth and rising competitive pressures keep us UW.”
Nomura also assigned a ‘neutral’ rating on the stock with a target price of ₹3,769 per share, implying a potential loss of 2% in the next 12 months. The brokerage mentioned that Q3 results were in-line with estimates. Slowing retail & rising competition could impact more in FY25, the brokerage stated, adding that the success of new launches can drive up ASPs further.
The brokerage maintained FY24-26 Royal Enfield (RE) volumes at 9.19 lakh and projected an EBITDA margin at 26.4-26.9% for the period.
Jefferies, however, projected a potential upside of 27% to the stock from current trading price on the back of its lower valuations compared to its competitors like Hero MotoCorp and Bajaj Auto.
The brokerage assigned a ‘buy’ call with a target price of ₹4,900 per share. It mentioned that Q3 EBITDA and profit after tax rose by 27-34% year-on-year and were in line with estimates.
The company’s RE volumes were flattish on a quarterly basis, while EBITDA/Vehicle rose by 2% sequentially to a new high.
Jefferies stated that Eicher Motors shares have lagged the Nifty Auto Index by 35% since January 2023 largely due to competitive concerns.
While it sees the impact on the company from new launches by Harley and Triumph Motorcycles, Jefferies noted that the stock is trading at its lowest PE premium to Hero Moto and Bajaj Auto in a decade.
Eicher Motors should benefit from potential tailwinds of 2-wheeler demand recovery and premiumisation, it stated.
Eicher Motors shares rebounded from early lows to trade 1.5% higher at ₹3914.95 apiece on BSE at 9.51 am.
Also Read: Adani Enterprises shares get 20% upside target! What Jefferies says on capex, new businesses
First Published: Feb 14, 2024 10:29 AM IST
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
In Ayodhya, voters talk of a promise fulfilled and yearning for development
May 17, 2024 2:10 PM
Fight of heavyweights in Sambalpur where farmers, weavers hold the key
May 17, 2024 12:25 PM
Odisha: Fight of heavyweights in Sambalpur where farmers, weavers hold the key
May 17, 2024 10:22 AM
Lok Sabha Election 2024: What rural Delhi wants
May 16, 2024 10:10 PM