Eicher Motors surges 3% after Q1 results announcement; here is what top brokerages say

Eicher Motors Q1 review: Shares of Eicher Motors, the parent company of Royal Enfield bike manufacturer, surged as much as 2.9 per cent to Rs 3,478.15 apiece on the BSE on Friday (August 4), a day after the company released its June quarter numbers. However, the stock pared gains later but was still trading 0.58 per cent higher at Rs 3,399.55 on the BSE.

For the June quarter, the company reported a consolidated net profit of Rs 918 crore, up 50 per cent on the back of strong sales across domestic and international markets. Total revenue from operations rose to Rs 3,986 crore in the first quarter as against Rs 3,397 crore in the year-ago period, Eicher Motors said in a regulatory filing. This is the best ever Q1 performance for the company, and is also the fourth consecutive quarter of highest-ever revenue from operations and profit, it added. Royal Enfield sold 2,25,368 motorcycles in the first quarter, an increase of 21 per cent from 1,86,032 units in the same period of the 2022-23 fiscal. CLICK HERE TO READ FULL COPY 

What brokerages say

Eicher Motors (EIM) 1QFY24 consolidated results were better with ~3%/6% beat to our/street EBITDA leading to margins beat by ~100bp/160bps at 25.6% (+110bp YoY/110bp QoQ, 12-quarter high). This was largely due to the positive impact of the price hike and cost savings, higher spare sales offsetting lower exports," said analysts at YES Securities.

However, margin expansion ahead will be gradual as a stable raw material (RM) and price hike (+1.5% in 2Q in domestic) will be partially offset by launch expenses related to the new Bullet 350 in August 2023, the brokerage added. 

While the demand outlook is mixed or weak for domestic and exports, the management sounded confident enough to navigate increased competitive intensity by playing on RE’s strengths developed over the past decade. Further, it has hinted at a slew of disruptive launches (which will be spaced out), which should help expand the overall mid-size market, YES Securities said further.

It has a 'BUY' call on the stock with a target price of Rs 4,008.

Analysts at JM Financial note that a recent price hike (during 2Q), softening raw material (RM) prices, and cost control initiatives are expected to support the margins in the near term. "We remain watchful of how the competition pans out over the next few quarters," they wrote in their earnings review note.

Demand in the international markets is expected to gradually recover, led by brand-building activities and an expanding product portfolio and distribution network. In the domestic market, with the recent launch of Harley and Triumph (at aggressive price points), "we believe Royal Enfield will once again be compelled to re-calibrate its pricing vs. growth strategy, which may put pressure on its margin during FY25 when the competition ramps up the volume," it added. The brokerage has maintained a "BUY" call on the stock; however, the target price has been revised downwards to Rs 3,750 from Rs 4,050 earlier.