Share prices of a leading player in the Indian automobile industry moved down over 2 percent to Rs. 3,741 in the early morning session on Tuesday.
Global brokerage firm Morgan Stanley downgraded the Eicher Motors stock from ‘equal-weight’ to ‘underweight’ and trimmed its target price to Rs. 3,209 from Rs. 3,552 per equity share, suggesting a further decline of 17 percent from the closing levels of Monday.
Analysts at Morgan Stanley highlighted a couple of reasons behind this downgrade expecting challenges in its growth and market share, high valuations and limited margin upside.
Not just Bajaj Auto or Harley Davidson, Eicher’s Royal Enfield is experiencing rising competitive pressure in the market with the recent entry of Hero Motocorp in the 440cc segment with the newly launched Maverick.
Earlier on 8th January, Royal Enfield, a unit of Eicher Motors Limited (EML), signed a non-binding Memorandum of Understanding (MoU) with the Tamil Nadu government at Global Investors Meet 2024.
Under the MoU, nearly Rs. 3,000 crores were proposed to invest over eight years into the state to set up greenfield and brownfield projects in Tamil Nadu. This investment will be majorly used for the development of new products, EVs and for any capacity enhancement for ICE, whenever required.
The share price of Eicher Motors Ltd. went down by over 0.45 percent at Rs. 3,814.15 and it is still 9 percent below its 52-week high of Rs. 4,201.7, hit on 4th December last year. The stock has given 13.88 percent returns in the last 6 months and over 21 percent in last one year. So far in 2024, the stock has fallen to more than 5 percent.
Incorporated in 1982, Eicher Motors Ltd is the listed company of the Eicher Group in India and has a market cap of Rs. 1,04,743 crores. It is a leading player in the automobile industry as well as the global leader in middleweight motorcycles.
Financially, the company is almost debt-free and has been maintaining a healthy dividend payout of 35 percent. The revenue from operations grew by 40.24 percent from Rs. 10,298 crores in FY21-22 to Rs. 14,442 crores in FY22-23, accompanied by an increase in profits from Rs. 1,677 crores in FY21-22 to Rs. 2,914 crores in FY22-23.
As of the September quarter, the FIIs hold 28.89 percent of the shares whereas DIIs hold 10.48 percent, aggregating to 39.37 percent of institutional holding.
EML is the owner of the iconic brand Royal Enfield, the world’s oldest motorcycle brand in continuous production. In addition to motorcycles, Eicher has a joint venture with AB Volvo of Sweden to create Volvo Eicher Commercial Vehicles Limited (VECV).
Written by Shivani Singh
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