Eicher Motors Q3 Review: Target Price Reduced After Marketing Expenses Weigh Earnings
Eicher Motors launched five products in Q3, and employed more on marketing during festive season, which weighed on its earnings, according to UBS.
Nuvama and UBS Global Research reduced Eicher Motors Ltd.'s target price, after the company's weaker than expected performance in the third quarter.
Eicher Motors launched five products during October–December, and employed more on marketing during festive season, which weighed on its earnings, according to UBS Global Research.
Eicher Motors has clarified that marketing and branding expenses will continue to be its focus, over margins at current juncture. UBS Global Research included this into estimates, resulting in moderation in operating profit estimates, the brokerage said in a note on Tuesday.
Eicher Motors Q3 FY25 Highlights (Consolidated, YoY)
Revenue up 19% to Rs 4,973.1 crore (Bloomberg estimate: Rs 5,075.2 crore).
Ebitda up 10% to Rs 1,201.2 crore (Estimate: Rs 1,340.2 crore).
Ebitda margin expands to 24.2% vs 26.1% (Estimate: 26.40%).
Net profit up 18% to Rs 1,170.5 crore (Estimate: Rs 1,198.5 crore).
UBS Global Research has also downgraded Eicher Motors to 'neutral' from 'buy', noting Eicher Motors is trading at premium to other two-wheeler original equipment manufacturers. Eicher Motors share price has risen significantly and now is in line with the past-five-year mean.
The company missed Nuvama's Ebitda estimates for the quarter because of adverse product mix and higher marketing expenses, the brokerage said.
Nevertheless, Nuvama raised revenue estimates for Eicher Motors by 4–7% for financial year 2025 and 2027. For the same period, the brokerage is estimating 12% and 13% revenue and Ebitda estimates. The brokerage retained 'buy' rating on the stock.
Nuvama is positive on Eicher Motors' topline because it believes momentum in domestic sales in Royal Enfield will likely continue, due to strong acceptance of new bullet-variant in the market.
In contrast to most brokerages' view, Nirmal Bang Institution kept Eicher Motors as its top pick and hiked the target price to Rs 6,225 from Rs 5,540. The current target price implied 17% upside potential from Monday's closing price.
The reason behind Nirmal Bang Institution's positive view on Eicher Motors is recovery in retail volumes is expected to continue. Exports in Royal Enfield segment is expected to do well. Moreover, Eicher Motors is planning to expand export portfolio along with geographic reach.
