Eicher Motors which is the second most expensive stock on Indian stock exchanges has started to witness some selling pressure in its market valuation. What is surprising is that even the humming sales of it’s flagship two-wheeler Royal Enfield have failed to cheer investors. Significantly, and much to the worry of investors,  the company's stock has tumbled by nearly 3% on stock exchanges today. However, the figures are even more shocking because the stock has plunged by more than Rs 1,800 or 6% in just two days. Current valuation of Eicher is over Rs 30,000, but guess what analysts have given a Sell call with a target price that is half of the current trading price! 

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For April 2018 month, Royal Enfield sales stood at 76,187 units which rose by 27% from sales of 60,142 units in the same month of previous year. Royal Enfield with engine capacity up to 350cc surged by 24% yoy to 70,111 units, where the engine over 350cc grew by 60% to sales of 6,076 units. 

Riding on Royal Enfield sales, analysts have always been upbeat on Eicher Motors, even the share price in one year showed some promising performance. 

From April 2017 to till date, share price of Eicher has touched a high of Rs 33,483.95, giving return of 32.16% to investors. 

But in past two days, things look bleak in Eicher’s stock price. 

On Wednesday, after touching intraday low of Rs 30,320, the share price of Eicher closed at Rs 30,500 down by Rs 714.95 or 2.29% on BSE. 

With this, the company has given away Rs 1,843.75 or 5.73% gains in two trading session. The share price of Eicher was at Rs 32,163.75-mark last week. 

Chirag Jain and Indrapreet Singh analysts at SBICap Securities said, “After nearly 5 years of more than 50% volume CAGR, our analysis of state-wise sales trend coupled with our dealer checks suggest the first-ever sign of sharp growth deceleration in bookings for Royal Enfield (RE). We believe this is not yet reflecting in reported sales volumes up 23% FY18-YTD on account of run-off in order book, relatively benign channel inventory supported with network expansion.”

The duo added, “RE’s limited brand appeal and comparatively weaker R&D capabilities would act as meaningful impediments to medium-term success in export markets.”

Compared to 50% EPS CAGR over FY12-17, the analysts at SBICap said, “we expect growth to normalize with 20% CAGR over FY18e-20e and hence, argue for a multiple de-rating to 25xPE (from 32x). They added, “We draw parallels from Harley Davidson, a similar cult biking brand, to demonstrate the possibility of such de-rating.”

Meanwhile analysts at Ambit said, “Export success remains uncertain because of lack of brand, distribution networks and broader product portfolio (we estimate only 5% volume contribution by FY2020). Higher R&D spends and export market expenses (marketing and personnel costs) likely to restrict EBITDA margin gain from domestic volume growth.” 

Considering the above factors, SBICap analysts have given a Sell call with a target price of Rs 25,110 down by 22.5% current valuation. 

Ambit said, “In our SOTP of Rs 15,500 (vs Rs 15,800 earlier), we value (i) RE at Rs 13,500/share, implying 27.3x December 2017 net earnings, an 85% premium to Hero/Bajaj’s multiples.”

Will Eicher see it's good days turn to ashes on stock exchanges? However, the company has faced tough times earlier and came back strong.