In early morning trading on Thursday, November 14, shares of Eicher Motors, the world leader in the middleweight motorbike market, jumped by about 8% to ₹4,940 per share after the firm reported a higher-than-expected quarterly profit on Wednesday. Strong sales of higher-margin motorcycles with engine displacements greater than 350 cc propelled the rhythm.
Despite fierce competition from other companies in the high-end bike market, this expansion has occurred. Brokerage companies’ opinions on the stock have remained positive after the company’s impressive Q2 performance.
Jefferies maintained its ‘buy’ recommendation with a target price of ₹5,500 per share, pointing out that Royal Enfield’s volumes are beginning to increase and that the company will gain a lot from the trend of two-wheeler premiumization.
According to Jefferies, Eicher Motors has now passed the most difficult stage of its rivalry. Nomura, a Japanese brokerage company, raised its price objective for Eicher to ₹4,391 per share and upgraded its rating to ‘neutral,’ citing a better growth strategy.
However, because of valuation concerns, Morgan Stanley kept its ‘underweight’ rating on Eicher Motors with a price objective of ₹3,655 per share. Nuvama Institutional Equities raised its target to ₹5,500 and upgraded the stock to a “buy.” From FY24 to FY27, it forecasts a 9% revenue CAGR for Eicher Motors.
Q2 earnings
In comparison to the ₹4,115 crore in the same quarter of FY 2023-24, Eicher Motors recorded its highest-ever Q2 revenue from operations for Q2 FY 2024-25 at ₹4,263 crore. While margins stayed constant at 26%, EBITDA was ₹1,088 crore, a little increase from ₹1,087 crore in the same quarter of the prior fiscal year.
During the same period last year, the profit after tax was ₹1,100 crore, an 8.3% increase from ₹1,016 crore. Demand from the company’s core market of urban consumers drove a more than 36% increase in motorcycle sales with engine capacities exceeding 350 cc, such as the “Interceptor 650.”
Sales of these higher-margin motorcycles increased from 11.1% to 15.3% of total sales in the previous year. The ‘Hunter 350’ and other bikes with engines up to 350 cc, which still account for the majority of Eicher’s sales, saw a 12% drop in domestic sales, but this growth helped balance that fall.
According to the company’s Q2 results filing, Royal Enfield sold 2,25,317 motorcycles during the quarter, which is marginally less than the 2,29,496 motorcycles sold during the same period in FY 2023-24.
The Bear 650 and the Classic 650 are two new motorcycles that the business introduced earlier this month on its 650-Twin chassis. Royal Enfield also made a foray into electric mobility with the Flying Flea, a new EV brand.
Additionally, Eicher made great strides in broadening its global presence. It set up a manufacturing and assembly facility in Bangladesh and introduced the Royal Enfield brand there with a new flagship store in Dhaka.
Building on the solid foundation established in Q2, the company is also establishing a second CKD factory in Brazil later this year.
