Why Royal Enfield-maker Eicher Motors may vroom by up to Rs 890 per share in 1 year?

Eicher Motors: Domestic brokerage firms are upbeat on Eicher Motors on the back of Royal Enfield maker driving premiumisation play in two-wheeler space with healthy double-digit volume growth and robust export opportunities.

ICICI Securities said that shares of Eicher Motors may vroom by up to Rs 890 or 28 per cent apiece in the next 12 months to Rs 4,065 from the current market price. The shares of the Royal Enfield-maker settled at Rs3255 on Wednesday. 

The report said that Eicher Motors is the market leader in the >250 cc premium motorcycle segment, commanding a market share of more than 85 per cent through its models under the Royal Enfield (RE) brand like Bullet, Classic, Interceptor among others.

The 360-degree approach to products, exports, marketing and pricing is ticking the right boxes for growth. It is helping Eicher Motors reach a wider audience in the domestic market and a bigger international market, it said.

The company in the October-December quarter posted a whopping 62.42 per cent rise in consolidated profit after tax at Rs 740.84 crore, riding on strong sales.

SMIFS Limited has tagged a 'buy' rating on the counter with a target price of Rs 3,829. It said that the company's strategies are going well.

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"Eicher Motors Limited's price has grown at 4 per cent CAGR over the last five years (from | 2,732 levels in February 2018), in line with the broader Nifty Auto index," the brokerage said in a report.

The brokerage expects commodity softness and recent pricing action to benefit to flow-in and no more critical supply concerns is a major relief. Another leading brokerage firm, Sharekhan said that the performance in Q4FY23 will enhance on account of price hike, increase in production on ease out of supply constraints and soft RM cost benefit.

It said that Eicher Motors has increased prices by 1-1.5 per cent on Hunter and Bullet but the benefit of increase in prices was not reflected in Q3FY23 due to price protection to earlier bookings. It noted that along with the domestic market, Hunter has started catering to the export market thus gaining significant market share in the mid-size motorcycle segment. 

The introduction of Hunter model has revamped its volumes, while a suitable price hike coupled with the introduction of new products in the 650CC segment would improve its product mix.

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