Shares of Eicher Motors, the parent company of Royal Enfield motorcycles, jumped nearly 7 per cent to hit an intraday high of Rs 3,647 in an otherwise weak market.
Eicher Motors on Thursday reported a solid 48 per cent rise in net profit for the quarter ended March 2023 at Rs 906 crore as compared to Rs 610 crore in the same period a year ago.
Company records highest ever revenue from operations; Rs 3,804 crore, up 19.1 per cent from Rs 3,193 crore in the corresponding quarter of FY22. EBITDA in Q4 FY23 was Rs 934 crore, higher by 23.3 per cent as compared to Rs 757 crore in the same quarter last fiscal. Royal Enfield sold 214,685 motorcycles in Q4 FY23, up 17.9 per cent from 182,125 in the corresponding quarter of FY22.
“We have registered our best ever sales performance of t 834,895 units (up 38.4 per cent from 6,02,268 in FY 2021-22) and up from the previous best performance in 2018-19. During the year, Royal Enfield also crossed the 100,000 export shipment milestone for the first time, said Siddhartha Lal, Managing Director, Eicher Motors.
The company’s board has also recommended a final dividend of Rs 37 per equity for the financial year ending March 2023. The dividend will be paid within 30 days from the date of shareholders’ approval.
What should investors do now?
The stock has gained 23 per cent since the beginning of this financial year, while the benchmark index has gained nearly 5 per cent.
The stock is also traded in the Futures & Options segment on NSE. As per the May series options data, the stock has maximum positions (open interest) at 3,600 and 3,700 calls. Thus, the range of Rs 3,670 – 3,750 indicates potential resistance.
The notable open interest in Put is Rs 3,300 with a fresh build-up seen at Rs 3,600 and Rs 3,500. Thus, the range of Rs 3,500 – 3,550 indicates potential support.
Jefferies has maintained ‘buy’ on Eicher Motors, but the stock is lower in its pecking order.
The foreign brokerage has a price target of Rs 4,000, estimating an upside of 17% from the last close. The brokerage said RE at 25X FY25E PE and raised target target on the commercial vehicle business from valuation of Rs 3,800 at 5X FY25E PB.
“We continue to prefer Eicher as we see tailwinds of 2W demand recovery, industry premiumisation and growth in exports,” said a report.
Motilal Oswal has downgraded the stock to ‘Neutral’ with a target price of Rs 3,650. It is 7% higher than the previous closing price. Valuations at 24.5X/19.3X largely reflect expected volume and margin recovery, but not the potential risk from Bajaj Triumph’s upcoming launch in mid-size motorcycles in India and global markets. “Therefore, we downgrade our rating from Buy to Neutral,” Nuwama said.
Kotak has recommended ‘Sell’ rating on Eicher Motors, expecting more fierce competition going forward.
“With the expected launches from Bajaj-Triumph and Hero-Harley in the 250cc motorcycle segment, competitive intensity is expected to increase, which could weigh on the company’s growth prospects,” the brokerage said.
Despite the launch of Hunter 350, demand recovery in RE’s domestic portfolio (pre-Hunter) remained weak due to high upfront costs and major states continued to weigh on demand recovery.
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