Eicher Motors Q4 Results Review: Focus On Growth Continues To Hurt Margins — Motilal Oswal Maintains 'Sell'

Motilal Oswal factors in a 10% volume CAGR for Royal Enfield over FY25-27E as the company plans to continue prioritizing growth over margins. Hence, it expects margins to remain under pressure, as any benefit from an improving mix (higher spares and apparel sales) is likely to be invested by RE in demand-generation activities. This is clearly visible in the past two quarters, where volume has seen a healthy pick-up, albeit at the expense of margins. Hence, the brokerage expects RE to deliver a much slower 7% earnings CAGR over FY25- 27E. Given the expected slower earnings growth, we see no reason for the stock to trade at premium valuations.

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Motilal Oswal Report

Eicher Motors Ltd.’s Q4 FY25 PAT at Rs 13.6 billion came in ahead of our estimates of Rs 12.8 billion, led by higher other income and a lower tax rate, even as operational performance was below our estimate.

Management has indicated that it would continue to invest in demand-generation activities, including brand building, to help drive growth going forward.

We expect Royal Enfield to deliver a 7% earnings CAGR over FY25-27E. Given the expected slower earnings growth, we see no reason for the stock to trade at premium valuations.

Reiterate Sell with a target price of Rs 4,649 (premised on FY27E SoTP).

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