Bidding for Ducati takes Eicher Motors' shares to an all-time high

Key Highlights: 

• Eicher Motors touch an all-time high on stock exchanges
• Analysts raises target price of Eicher Motors over Rs 39,000 per share
• Eicher Motors is set to offer $1.8 billion-$2 billion for Volkswagen's Ducati

Eicher Motors share price hit an all-time high on Friday after when media reports mentioned that the company is set to offer $1.8 billion-$2 billion for Italian motorcycle manufacturer Ducati.

A Economic Times report on September 07, stated that deal is being valued at 14-15 times Ducati's earnings before interest, taxes, depreciation and amortisation (EBITDA) of about 100 million euro.

Following which, share price of the company has touched a fresh high of Rs 33,483.95 per piece on BSE. At 1031 hours, it was trading at Rs 33,321 per piece higher by Rs 535 or 1.63% on the index.

Also, the company has been rallying since four-consecutive day now. The stock price which stood at Rs 31,685-level has gained by nearly 6% and touched an all-time high.

In the month of April, German-maker Volkswagen decided to put Ducati for sale including a sale of the brand – which is wholly controlled by VW's Audi division.

Volkswagen earlier this week, instructed five potential buyers to hold off making binding bids.

Reportedly, it was known that the maker of Royal Enfield is believed to be the only Asian firm left in the auction and the Economic Times quoted unnamed sources saying it is currently finalising terms ahead of the original bid deadline of end-September.

Eicher Motors is not the only one who has shown interest in Ducati. Companies like Harley Davidson, Suzuki, Bajaj Auto, Hero Motocorp, KKR and CVC Capital Partners have also triggered their interests in this German-based motorcycle.

However, Eicher Motors is yet to confirm the news, but for now investors have showed their happiness over the deal by tapping the company's share price.

Rating-agency CLSA in a BloombergQuint report, increased the target price of Eicher Motors to Rs 39,300 per piece from previous Rs 31,500 per piece.

This new target price was followed by four reason – CLSA expects Eicher Motors order inflow to remains above production and is growing at 15% level, Enfield’s production capacity to rise 40% over FY17-19, earnings to grow at CAGR of 29% over the next 3 years and lastly positive on strong long-term growth outlook and low competitive threat.

Riding on Royal Enfields strong sales, Eicher Motors' business portfolio has been better since past few quarters. Start of financial year 2017-18 (FY18) has also been good for the motorbike as it has sold 316,432 units between April – August 2017, up by 23% compared to 256,582 units in the corresponding period of the previous year.