Eicher Motors Share Price Drops After Weak Q3 Earnings, Brokerages Turn Bearish

Shares of Eicher Motors Ltd. fell over 7%, after several brokerages expressed concern following the company's weaker-than-expected performance in the third quarter. The company's increased marketing expenses and adverse product mix is said to have impacted its earnings, leading to target price reductions and rating downgrades from some analysts.

Eicher Motors launched five new products during the October-December 2024 quarter and significantly increased its marketing spend during the festive season. This investment, while aimed at boosting sales, weighed heavily on the company's profitability, according to UBS Global Research.

In the third quarter, the company reported a rise in key metrics but missed Bloomberg estimates. Its revenue was up 19% to Rs 4,973.1 crore but below Bloomberg estimate of Rs 5,075.2 crore, while its Ebitda was up 10% to Rs 1,201.2 crore, missing the Rs 1,340.2-crore estimates. Its net profit rose 18% to Rs 1,170.5 crore, below the estimate of Rs 1,198.5 crore.

UBS Global Research downgraded Eicher Motors to 'neutral' from 'buy', citing the company's premium valuation compared to other two-wheeler manufacturers. They noted the significant rise in Eicher Motors' share price, which now aligns with its five-year mean.

Nuvama also acknowledged that Eicher Motors missed its Ebitda estimates due to the adverse product mix and higher marketing expenses. However, they raised revenue estimates for the company by 4-7% for fiscals 2025 and 2027, projecting 12% and 13% growth in revenue and Ebitda, respectively. Nuvama retained a 'buy' rating on the stock.

Contrary to the prevailing bearish sentiment, Nirmal Bang maintained Eicher Motors as its top pick and increased the target price to Rs 6,225 from Rs 5,540, implying a 17% upside potential from Monday's closing price.

Shares of Eicher Motors fell as much as 7.08% to Rs 4,957 apiece. They pared losses to trade 5.57% lower at Rs 5,038 apiece, as of 10:08 a.m. This compares to a 0.36% advance in the NSE Nifty 50.

The stock has risen 30.12% in the last 12 months. Total traded volume so far in the day stood at 14 times its 30-day average. Relative strength index was at 42.

Out of 41 analysts tracking the company, 18 maintain a 'buy' rating, 14 recommend a 'hold' and nine suggest 'sell', according to Bloomberg data. The average 12-month analysts' consensus price target implies an upside of 5%.