Eicher Motors, the manufacturer of Royal Enfield (RE) motorcycles, is headed for a strong near term upside, believe domestic brokerage firm Choice Broking. The homegrown broker sees a strong upside in the near-term based on the recent breakout, supported by strong volumes and positive view on the counter, which may push it to new highs.
Eicher Motors is consolidating within a rectangle chart pattern. The price action indicates a potential breakout from the range, supported by increasing trading volumes, which highlight strong buying interest and signal the possibility of further gains, said Sumeet Bagadia, Executive Director at Choice Broking.
Key technical indicators reinforce this bullish outlook. The stock is trading above critical EMAs, particularly the 50-day EMA, confirming a positive trend and supporting further upside potential. The RSI is at 58.83, suggesting strengthening momentum and increased buying activity, aligning with the anticipated upward movement, he said.
"To manage risk, a stop-loss at Rs 4,800 is recommended to protect against unforeseen reversals. For those looking to enter this position, buying around Rs 4,900 offers an attractive reward-to-risk ratio. Eicher Motors presents a strong buying opportunity with a target of Rs 5,400, supported by robust technical indicators and prudent risk management strategies," Bagadia added.
Shares of Eicher Motors gained nearly 2 per cent to settle at Rs 4,964.70 on Tuesday, commanding a total market capitalization of 1.36 lakh crore. The stock, which has gained nearly 40 per cent from its 52-week lows at Rs 3,564, merely 3 per cent shy from its 52-week high, hit two months ago.
Not only technical analysts, even the fundamentalists are positive on the counter. They see a decent upside in the counter in the coming months post its results in the September 2024 quarter. Eicher reported a mixed performance in Q2, as it missed Ebitda margin estimates; bottom line came close to estimates on lower tax providing and higher income from VECV, said Sharekhan.
"Retails in the overseas market is increasing. Management expects a gradual improvement in its overseas business going ahead, said. We maintain BUY with an unchanged target price of Rs 5,307, led by its leadership position in the premium motorcycle segment, rising premiumisation, and a focus on balanced growth," it added.
YES Securities expects RE’s overall volumes to grow at 7 per cent CAGR over FY24-27E, despite competitive launches. Recent launches could be an inflection point for RE as a completely new and improved platform should drive efficiencies. "However, we remain watchful of domestic average monthly run-rate as exports recovery to be only gradual," it said.
On the other hand, VECV is approaching a cyclical decline in volumes. We upgrade FY26/FY27 EPS by 4-6 per cent to reflect upon likely better RE exports and higher other income, partly offset by cut for VECV margins, YES Securities added, maintaining a 'buy' rating on the stock with a revised target price of 5,526.
Motorcycle segment’s gross margin stayed at 45.7 per cent, dipping marginally QoQ, as the focus shifted to growth, said BoB Capital Markets. "FY25E/FY26E earnings unchanged, marginal uptick in FY27E earnings. We revise our target price to Rs 4,855 (from Rs 4,724)," it added with a 'hold' rating.