Eicher Motors Q2 Review: Strong Demand But Margin Outlook Mixed, Say Brokerages — Check Revised Target Price

Eicher Motors Ltd.’s second-quarter results have drawn a broadly cautious yet constructive reaction from brokerages, with most firms highlighting strong demand momentum at Royal Enfield but signalling limited margin upside due to capacity constraints, weaker mix trends and rising marketing spends. While forecasts have been adjusted, opinions remain divided on valuation and earnings potential.

Morgan Stanley maintained its Equal-weight rating and trimmed its price target slightly to Rs 7,190 from Rs 7,201. The brokerage noted that Eicher’s Q2 Ebitda was in line with consensus but a touch below its own estimate.

It highlighted that while demand remains robust, incremental margin expansion appears constrained because the company is operating close to full capacity. Peak utilisation, it said, implies limited operating leverage gains, making future price hikes a key factor to watch.

Morgan Stanley also expects the sales mix to remain skewed towards sub-350cc models. Still, it believes the company is right to stay growth-focused and raised its earnings per share estimate by 6%, reflecting stronger demand. The marginal earnings realignment drove its revised price target.

Citi maintained its Buy rating but cut its price target to Rs 7,750 from Rs 7,850. The brokerage said Q2 results were “slightly below estimates”, with a revenue miss flowing down to profit after tax due to a weaker product mix.

Citi noted that management is upbeat, expecting demand momentum to continue following recent GST cuts. Royal Enfield’s monthly run rate of 108,000 units and the announced capacity expansion, to 1.36 million units through debottlenecking, were flagged as key positives.

Enquiry and conversion trends remain strong, according to management. However, Citi trimmed its margin forecasts due to weak mix and rising marketing costs. It expects much of the growth to come from lower-end models, which could weigh on average selling price and margins.

Kotak Institutional Equities reiterated its Sell rating with a price target of Rs 5,750. The firm called Q2 an “in-line quarter” and said volume growth should sustain in the coming quarters. However, it continues to believe that ASPs and profitability will underperform expectations.

Kotak also emphasised that the stock remains expensive, trading at 34 times one-year forward earnings for the domestic two-wheeler business—expensive in its view relative to growth visibility.

Emkay Global retained its Add rating and price target of Rs 6,900, citing a steady quarter supported by strong Royal Enfield volumes and consistent realisations. The brokerage highlighted management’s optimism, reflected in festive retail sales rising 45% year-on-year in September–October 2025 and strong traction in the first half of the year.

Emkay expects this momentum to continue into the second half. It also noted that while the 350cc portfolio remains the primary growth driver, the 450cc and 650cc segments saw some moderation after Sept. 22.