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.

Shares of Eicher Motors last exchanged hands flat at Rs 3902.40 each on Wednesday.

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.

Eicher Motors share price: Past performance 

As of February 12, Eicher Motors shares grew 19 per cent in the past year, as against gains of 22 per cent and 48 per cent in the Nifty50 and Nifty Auto indices respectively.

The auto major’s stock strengthened 19.9 per cent in the fiscal third quarter while the 50-scrip benchmark index rose 10.7 per cent and the auto gauge gained 15 per cent.

Should you buy or sell the stock?

Citi and Jefferies have maintained their 'buy' ratings on Eicher Motors with revised targets of Rs 4,600 and Rs 4,900, respectively. 

According to CLSA, which upgraded the auto stock from 'sell' to 'underperform', Eicher Motors' EBITDA margin was above its expectations led by lower marketing costs.

Its VE Commercial Vehicles (VECV) demand, a joint venture company between AB Volvo of Sweden and Eicher Motors Ltd, continues to rise while market share is likely to decline, according to brokerage.

Jefferies noted that the company's third-quarter EBITDA and PAT rose 27-34 per cent on a year-on-year basis and were in line with expectations.

However, RE volumes were flattish sequentially, while the EBITDA/vehicle rose 2 per cent to a new high, the brokerage added.

Macquarie, Nomura and JP Morgan maintained their 'neutral' calls on the Eicher Motors stock, with targets of Rs 3,987, Rs 3,760 and Rs 3,700, respectively.

According to Nomura, Eicher Motors' Q3 results were in line with the brokerage's estimates, but slowing retail and rising competition could impact the auto company 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 3,615 to Rs 3,700. According to the brokerage, the results were in line with expectations.

The 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, according to JP Morgan.

"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.

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