Eicher Motors continues to slide, HDFC Securities downgrades stock to REDUCE

Eicher Motors share price: Eicher Motors shares remained under pressure for the third straight session on Thursday, July 6, amid a significant increase in competition. At the time of filing this report, the stock was trading 2.70 per cent lower at Rs 3,220.50 on the BSE. It hit a low of Rs 3,207.55 during the trade. The stock eventually settled at Rs 3.222.90, down 2.63 per cent.

Meanwhile, HDFC Securities has downgraded the stock to REDUCE from ADD with a target price of Rs 3,086 from Rs 3,310 earlier. The brokerage said that aggressive competition will hurt Eicher Motors' flagship unit, Royal Enfield's, growth.

Over the last two days, both Harley Davidson (in partnership with Hero MotoCorp) and Triumph (in partnership with Bajaj Auto) have launched cruiser bikes at extremely competitive and similar price points, which are marginally higher than Royal Enfield’s best-selling Classic 350cc (Chrome), analysts at the brokerage note.

"What leaves us confused is the fact that while pricing is aggressive, both players seem to have very limited capacity to start with. We, therefore, believe that this is likely to be introductory pricing and unlikely to be sustainable in the long run for the features and brands on offer. Nevertheless, Royal Enfield (RE) would be forced to reconsider its pricing and brand strategy very quickly, which will in turn drive margin pressure," the brokerage said in its report dated July 6.

The brokerage further said that it expects RE to be in a much better position to fight back once this competitive pricing stabilises. "However, if these competitive price points sustain for a longer-than-expected time, it would lead to further downside risks to our estimates," it added.

Eicher Motors' share price

In the last three days, the stock has slipped nearly 12 per cent (from July 3, 2023, closing to today's low level on the BSE).