Eicher Motors Maintains Neutral Rating, Target Price at Rs 6960: Motilal Oswal
Eicher Motors (EIM) Research Report
Summary
We conducted a meeting with Eicher Motors' management to assess the company's business outlook amidst a challenging global macroeconomic environment. Our analysis indicates a healthy domestic demand momentum, particularly in the 350cc segment, where demand currently outweighs supply.
Business Outlook
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Domestic demand in the 350cc segment remains strong, while the 350cc+ segment experienced a decline following the GST increase. However, demand is gradually recovering due to Royal Enfield's (RE) product interventions. The export outlook is mixed, with regions such as Europe, the US, and Thailand posing a challenge, while the other half remains positive. The ongoing geopolitical conflict poses an immediate risk of a potential gas supply shortage, which could disrupt production if the situation persists.
Valuation and Recommendation
Given the global uncertainties, the stock has corrected 17% from its peak and now appears fairly valued at 29.8x FY27E and 26.0x FY28E. We upgrade the stock to Neutral with a revised target price of INR6,960. Our valuation is based on 28x Dec'27E EPS for Royal Enfield and 12x EV EBITDA for VECV.
Investor Takeaway
Investors should focus on Eicher Motors' continued focus on profitable volume growth rather than margins.
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