Eicher Motors Ltd saw its shares surging 8 per cent in Thursday's trade as a few brokerage upgraded their ratings for stock after the auto major suggeted a renewed focus on growth over margins, with product interventions in Royal Enfield (RE).
Eicher Motors' Q2 revenue and Ebitda missed the consensus estimates by 3 per cent and 6 per cent, respectively, amid 4 per cent lower average selling price (ASP) QoQ, hurt by elevated festive marketing spends. But analysts are positive on RE's focus on growth.
Emkay Global upgrade Eicher Motors to 'Buy' from 'Sell' and suggested a target price of Rs 5,300 .
"Royal Enfield (RE)’s renewed ‘growth focus over margins’ with product intervention (such as relaunch of the Bullet Battalion Black edition with retro looks), improved supplies, and higher marketing activities aided the strong festive sales. While the management did acknowledge a partial element of pent-up demand, post-festive momentum has largely sustained," Emkay noted.
The stock climbed 7.58 per cent to hit a high of Rs 4,937.40. The stock is up 20 per cent in the past one year.
"With the competitive cycle largely behind, along with growth revival, we raise FY26E/27E consolidated EPS by 10 per cent each, led by volume upgrades and building in 82K/97K average monthly RE volumes. We believe near-term margin pressure would be addressed once operating leverage kicks-in," Emkay added.
Nomura India also upgraded the stock's rating to 'Neutral' but suggested a target price of Rs 4,391. The foreign brokerage said it is encouraged to see RE’s shift in stance to drive volume growth rather than stick to margins. While this may not result in increased earnings due to lower ASPs and marketing spends, but it addresses key concern on long-term volume growth and too-high margins, making entry of competitors very easy, the brokerage said.
ICICI Securities said it has cut its FY25 and 26 EPS estimates by 2 per cent each to factor in lower margins led by higher marketing expenses. It maintained 'ADD' with revised target price of Rs 4,850 against Rs 4,827 earlier.
Nuvama said efforts on new products have continued -- Bear 650 has already been launched in America, Europe and India markets, while the Classic 650 is now available in the UK and Europe, and is set for an India launch in January 2025.
Eicher Motors unveiled its new electric motorcycles, the C6 and S6, under the Flying Flea brand, with a planned launch in early 2026.
"Exports are clocking strong growth and assembly capacities are being added in Brazil and Bangladesh. In all, given increased focus on key models and launch of new products, we expect a revenue CAGR of 9 per cent over FY24–27E," Nuvama said.
This brokerage has also upgraded the stock to ‘Buy’ (from ‘Hold’) with an increased target price of Rs 5,500 from Rs 4,500 earlier.