International brokerage CLSA has maintained its 'Buy' rating on Eicher Motors Ltd. while raising target price to Rs 39,300, indicating a potential upside of 19.59 percent from Thursday's closing price.
The Royal Enfield continues to see strong demand driven by its differentiated positioning and expanding dealer network, CLSA said in a report.
Order inflow [for Royal Enfield] remains above production and is growing at 15 percent YoY on same-store sales growth basis. This is despite multiple disruptions such as demonetisation and transition to GST in the last one year. Royal Enfield is also rapidly expanding its dealer network, which is providing an additional boost to volumes.CLSA Research Report
Enfield's production capacity will rise 40 percent over FY17-19, and earnings are likely to grow at a compounded annual growth rate of 29 percent over the next 3 years, according to the brokerage house.
Besides that, CLSA's bullish views also stem from strong long-term growth outlook and low competitive threat from other two-wheeler makers.
“The stock is trading at 35 times one year forward PE (price-to-equity) but its premium valuations should sustain given strong growth outlook and low competitive threat for Royal Enfield,” the brokerage said.
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