Jefferies maintains a ‘Buy’ rating for Eicher Motors and has raised the price target to Rs 4,150, indicating a 22% potential upside. In response to this upward revision, Eicher Motors’ stock price surged nearly 4% during the trading day. Jefferies cited reduced competitive concerns, a recovering two-wheeler demand, premiumization in the industry, and exports as favorable factors for investing in Eicher Motors. They now prefer Eicher Motors and TVS Motor over Bajaj Auto and Hero MotoCorp in the two-wheeler sector.
As of the latest data, Eicher Motors has a market capitalization of Rs 95,346.93 crore on the NSE, a P/E ratio of 29.95, and a dividend yield of 1.05. Over various time frames, the stock has shown positive performance, with a 1.4% gain in the past week, a 4.2% increase in the past month, and an impressive 19.6% rise in the last six months, while it experienced a 5.7% decline over the past year. The stock’s 52-week high was Rs 3,889.65 on November 1, 2022, and its 52-week low was Rs 2,836 on March 28, 2023.
Jefferies also emphasized Eicher Motors’ strong underlying performance, noting that despite challenges in the two-wheeler industry, Eicher delivered its highest Royal Enfield (RE) volumes and earnings per share (EPS) in FY23. The company’s Q1FY24 EBITDA also reached a new high, rising by 23% year-on-year. Additionally, Eicher Motors has gained market share in medium and heavy commercial vehicles (M&HCVs), with its market share growing from 10-13% in FY12-20 to 17% in FY23 and 19% in 1QFY24. Jefferies anticipates Eicher Motors’ EBITDA and EPS to increase by 62% and 81% respectively over FY23-26E, with FY24-25E EPS estimates exceeding street expectations by 7-13%.
Jefferies reaffirmed their ‘Buy’ rating on Eicher Motors with a revised price target of Rs 4,150, based on a valuation of RE at 25x FY25E PE and the commercial vehicle business at 5.5x FY25E PB. They also see potential for further multiples expansion in RE if the company can effectively maintain its market share in the competitive landscape.
On Tuesday, Eicher Motors’ shares closed at Rs. 3,475.10, reflecting a 2.61% increase.