Eicher Motors Ltd saw its shares falling 7 per cent in Tuesday's trade, as renewed focus on growth hurt the auto major's December quarter profitability, albiet slightly. Adverse product mix and higher marketing spends led to the Q3 miss, auto analysts said while appreciating that domestic sales for Royal Enfield (RE) expanded 13 per cent in Q3FY25 against a 2 per cent decline for the industry. Given the stock's valuation, however, they are mixed on Eicher Motors prospects, with target prices ranging from Rs 4,300 to Rs 6,100.
On Tuesday, the stock tanked 6.81 per cent to Rs 4,966.15. Emkay Global said Eicher Motors reported lower than expected average selling price (ASP), driven by a poor product mix due to higher share of the Bullet Battalion Black edition. It said margins were impacted by higher marketing and festive spends due to multiple launches in Q3.
Eicher Motors intends to keep focusing on driving volume growth over margins. It expects underlying margins to stabilise going ahead.
"We maintain Buy while revising up our target by 9 per cent to Rs 6,100 on the back of a higher multiple with sustained high Royal Enfield volume growth momentum ahead of industry growth. We believe near-term margin pressure, will be addressed once operating leverage kicks in," it said.
Eicher Motors’ operating performance missed MOFSL's estimates, with a 190 basis points YoY margin contraction at 24.2 per cent, the as management is now focused on driving growth.
"The management has indicated that it would continue to invest in demand-generation activities, including brand building, to help drive growth going forward. While exports improved in Q3, sentiment is likely to remain weak and the management maintains a cautiously optimistic outlook," MOFSL said.
It expects Royal Enfield (RE) to deliver a 12 per cent earnings CAGR over FY24-27E. Given the expected slower earnings growth, it sees no reason for the stock to trade at premium valuations. The brokerage retained its 'Sell' with a target of Rs 4,305.
Nuvama said the recently launched Bullet variant – Battalion Black highlights the retro design, resulting in strong acceptance. It said efforts on new products continue—Bear 650 has already been launched in America, Europe and India markets while the Classic 650 is available in the UK and Europe and is set for an India launch in Q4FY25.
"Furthermore, the company unveiled its new electric motorcycles, the C6 and S6, under the Flying Flea brand, with a planned launch in early 2026. Meanwhile, exports are clocking strong growth. In all, given increased focus on key models and launch of new products, we forecast a revenue CAGR of 12 per cent over FY25–27E," it said.
The brokerage has retained its ‘Buy’ with target of Rs 6,100 against Rs 6,000 earlier. InCred Equities has 'Hold' rating and a target price of Rs 4,841 on the stock.