Royal Enfield Demand Ensures Eicher Motors Remains In HSBC’s ‘Buy’ List
Royal Enfield’s growth comes as a positive surprise for the company.
- Domestic demand for Royal Enfield motorcycles remains strong
- Dealers report that order intake is nearly 20 percent higher than sales
- Exports expected to grow at 30 percent CAGR in FY17-19
- Large two-wheeler markets like Indonesia and Thailand offer significant sales potential
- Commercial vehicle market share to further increase in FY18
HSBC maintained a ‘buy’ rating on Eicher Motors Ltd. as the automaker’s Royal Enfield motorcycles continue to garner robust domestic demand and better-than-expected exports.
HSBC raised Eicher Motor's target price to Rs 30,500 from Rs 26,400 earlier.
Growth Motored By Royal Enfield
Royal Enfield continues to enjoy strong demand with bookings still higher than sales. HSBC said this lowers any sort of a growth risk. Dealers reported that order intake for the indigenous motorcycles was nearly 20 percent higher than the sales.
Betting on the strong sales demand, the brokerage firm expects inventory levels to remain low even if the waiting period shortens after incremental production capacity coming on stream in August.
Jump in Exports
On the export front, HSBC sees growth potential to be ‘exciting’ as Royal Enfield enjoys a monopoly in the 300-700 cc (cubic centimetres) cruiser segment.
The exports are expected to grow at 30 percent compounded annual growth rate (CAGR) between 2016-17 and 2018-19, owing to significant sales potential offered by large two-wheeler markets like Indonesia and Thailand.
The Gurgaon-based automaker’s market share in the commercial vehicle segment is set to gain in the current financial year, the report said, adding that the industry is seeing flat volumes while Eicher Motors continues to grow.
