Street gives a thumbs up to strong Eicher Motors results; what should investors do?

Eicher Motors share price: Eicher Motors shares rose on Wednesday, February 14, after the parent company of motorcycle manufacturer Royal Enfield reported a strong set of earnings for the October-December period. The Eicher Motors stock rose by as much as Rs 70.9 or 1.8 per cent to Rs 3,928 apiece on BSE, shrugging off overwall weakness on Dalal Street following a worse-than-expected US inflation reading that spooked global markets.

After market hours on Tuesday, Eicher Motors reported a 34.4 per cent year-on-year increase in consolidated net profit to Rs 996 crore for the December quarter.

The auto major’s revenue from operations grew 12.3 per cent to Rs 4,178.8 crore for the fiscal third quarter, according to a regulatory filing.

According to Zee Business research, Eicher Motors’ third-quarter consolidated net profit was estimated at Rs 970 crore and revenue at Rs 4,050 crore.

Should you buy or sell the stock?

Citi and Jefferies have maintained a ‘buy’ call on Eicher Motors with a revised target of Rs 4600 and Rs 4900, respectively. 

CLSA noted that the company’s EBITDA margins were above its estimations which were led by lower marketing costs. Its VE Commercial Vehicles (VECV) demand, a joint venture company between AB Volvo of Sweden and Eicher Motors Limited, continues to rise while market share is likely to decline, according to brokerage. CLSA has ‘upgraded’ the stock from ‘sell’ to underperform.

Jefferies noted that the company’s third-quarter EBITDA and PAT rose 27-34 per cent YoY and were in line with expectations. However, RE volumes were flattish QoQ, while EBITDA/vehicle rose 2 per cent to a new high, the brokerage added.

On the other hand, Macquarie, Nomura, and JP Morgan have maintained a ‘neutral’ call on the stock. The brokerages raised the target to Rs 3987, 3760, and Rs 3700, respectively.

According to Nomura, Eicher Motors’ Q3 results were in line; however, slowing retail and rising competition could impact more in FY25. The brokerage expects that the success of new launches can drive up ASPs further.

JP Morgan has raised the target from Rs 3615 to Rs 3700. According to the brokerage, the results were in line with expectations. Management expects volumes to improve in the coming quarters driven by ramp-up in the new Himalayan, new Bullet, and new variant introductions in the Hunter. “A little conservative as more than Rs 200,000 price point already facing subdued growth. Remain cautious as we anticipate potential deceleration in its domestic volume growth between FY24-26E,” the brokerage added.