Eicher Motor’s share price plunged 7% to an intra-day low of Rs 4,957.75 after the company’s margins contracted in the third quarter of the current financial year and spending rose to boost sales. “Given the expected slower earnings growth, we see no reason for the stock to trade at premium valuations,” said Motilal Oswal Financial Services in a research note post Q3 earnings.
Motilal Oswal reiterates ‘Sell’ rating
The brokerage firm Motilal Oswal reiterated its ‘Sell’ call on the stock, with a target price of Rs 4,305, a downside of 19.3% from the closing price of February 10. The Royal Enfield maker’s operating performance missed estimates, with a 190 bps year-on-year margin contraction to 24.2%, as management is now focused on driving growth, said the brokerage firm. The quarter-on-quarter margin contraction is attributed to the company’s focus on growth. “It launched models like the Goan Classic, Batallion Bullet, and Scram 410 with enhanced features but without any price increases, which impacted margins,” said Motilal Oswal.
Goldman Sachs on Eicher Motors: Cuts target price
Goldman Sachs has cut its target price on Eicher Motors after the makers of Royal Enfield reported a significant contraction in margins. The revised target price is now Rs 6000/share.
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However, another brokerage firm, Nuvama, raised the price target on the stock marginally to Rs 6,100 from Rs 6,000. It retained a ‘Buy’ call on the stock. The company’s domestic sales of Royal Enfield expanded 13% in Q3 FY25 against a 2% decline for the industry. It also raised the FY25-27 revenue estimates by up to 4%. “We reckon the momentum shall continue ahead on the back of strong acceptance of the new Bullet variant–Battalion Black, new models/variants (Bear 650, Classic 650, Guerrilla 450, Scram 450, Classic 350 variants) and marketing push,” said Nuvama. The brokerage house said that the company’s operating profit or EBITDA grew 10% on year to Rs 1,200 crore, however, fell short of estimates.
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