Eicher Motors Q4 Results Review: Growth Over Margins The Right Strategy, Say Analysts

Eicher Motors Ltd.'s fourth quarter results have drawn contrasting reactions from brokerages, with Morgan Stanley maintaining its ‘underweight' rating, while Citi retained a more optimistic ‘buy' stance. Both firms raised their target prices, albeit based on differing interpretations of the company's performance and valuation outlook.

Citi sees continued demand momentum and maintains a bullish stance, supported by product strength and improving market sentiment. Morgan Stanley remained sceptical, concerned about valuation and margin risks. While Citi has raised the target price to Rs 6,200 up from Rs 6,050, Morgan Stanley raised its target price to Rs 4,079 from Rs 3,855.

Both brokerages agree on one thing: Eicher's volume growth is healthy. The company reported consolidated revenue rise of 23% year-on-year, Ebitda was up 11%, and profit was up 27%.

Royal Enfield's standalone revenue rose 22% year-on-year to Rs 5,100 crore, in line with estimates. However, Ebitda was at Rs 1,260 crore, which was below forecasts, impacted by lower gross margins and higher expenses.

Morgan Stanley highlighted that the Ebitda margin of 24% missed their estimate by 100 bps and Bloomberg consensus by 240 bps, marking the second consecutive quarter of margin underperformance. Citi also noted margin pressure but pointed out that stronger other income helped profit exceed expectations.

Eicher's management is focusing on volume growth over margin expansion. The company is increasing marketing efforts and rolling out product enhancements to drive sales. Citi views this positively, expecting tax cuts and steady rural demand to support further growth in fiscal 2026.

The firm raised volume forecasts for Royal Enfield by 5%, but trimmed earnings estimate by 2–3% due to margin concerns. It is more optimistic on VECV, citing better margins and volume growth.

Morgan Stanley, however, is more cautious. While it agrees with the growth-first strategy, it believes the stock is already priced for both high growth and high margins. At 21 times FY27 EV/Ebitda (ex-VECV), Eicher trades at a premium to peers like Bajaj Auto Ltd., TVS Motor, and Hero MotoCorp.

Morgan Stanley expects margins to remain near current levels. It cut its financial year 2026–27 Ebitda and EPS estimates slightly.