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Dolat Capital Report
Eicher Motors Ltd. posted a stable performance in Q1. Ebitda margin expanded 107 basis points QoQ to 25.6 % due to price hike and cost control measures.
We expect rising contribution of Hunter in overall volume and increased branding and marketing expenses (to counter competition) to restrict margin expansion.
We expect grand success of Hunter 350 will help in increase the share of first time buyers. However Royal Enfield's volume growth to moderate due to new entrants Triumph and Harley at affordable price via partnerships with established motorcycle leaders in India.
We believe significant increase in competitive intensity has changed the business dynamics unfavorably for Royal Enfield for near to medium term which will lead to de- rating of target multiple.
AT current market price, stock is trading 27/24 times FY24/25E earnings per share.
We recommend 'Sell' with target price of Rs 3,072 (valuing at 22 times FY25E EPS).
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