Eicher Motors Q2 Review — Focus On Driving Growth To Weigh On Profitability; ICICI Securities Maintains 'Hold'

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ICICI Securities Report

Eicher Motors Ltd.’s Q2 FY26 standalone Ebitdam came in at 24.9%, 80bps below our estimate. Marketing / brandbuilding efforts and regular product interventions have been driving the outperformance for Royal Enfield in domestic market.

Retail growth in most international markets also remains healthy.

Eicher Motors re-iterated its focus on driving absolute profit growth, and thus, higher marketing spends / aggressive pricing strategy to drive growth could continue.

We are building in 13% volume CAGR over FY25-28E and expect Ebitda margin to expand to 25.5%/25.7% in FY27E/FY28E.

Maintain Hold with SoTP-based unchanged target price of Rs 7,200, implying 25 times P/E for RE and 12x EV/Ebitda for VECV.

Upside risks

• Successful new launches leading to higher-than-expected growth.

• Higher-than-expected growth in exports.

Downside risks

• Increase in competitive intensity / successful ramp up by competition impacting RE’s volume and market share.

• Further pressure on margins to drive higher growth.

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