Shares of this large-cap auto stock jumped up to 6 percent in Wednesday’s trading session after a well-known international brokerage raised its target price on the company’s stock with the revised price exhibiting a potential upside of approximately 30 percent from the prevailing share price level.
With a market capitalization of Rs 1.06 lakh crores, the stocks of Eicher Motors Limited opened their trading hour on Wednesday at Rs 3,817.05 and currently trade at Rs 3,872.60. The company’s stock witnessed an intra-day high price of Rs 3,938.60 indicating a gain of around 6 percent compared to the previous close of Rs 3,718.10 apiece.
Such sharp movements in the company’s stock are observed today after UBS, one of the well-known brokerage houses overseas, raised the target price on the stocks of Eicher Motors to Rs 5,000 compared to the earlier price target of Rs 4,300. The revised target price exhibits a potential upside of nearly 30 percent compared to the prevailing share price level.
According to UBS, the Royal Enfield segment of the auto company could likely witness growth in its domestic volumes at a compound annual growth rate (CAGR) of 10 percent between FY24-26, compared to the industry growth between 6 to 7 percent. Moreover, UBS also added the stock to its “APAC Key Call” list.
“We think the market is missing continued strength in Royal Enfield’s addressable market, lackluster response to competition, Royal Enfield’s strong customer connect, and the start of a multi-year upgrade cycle among existing customers.”, the brokerage commented on the aggressive shift of target price.
The brokerage also finds the company’s risk-reward aspect to be compelling since Royal Enfield remains insulated from the electrification risk.
During the recent financial quarters, the company’s prime business indicators, i.e., its operating revenues and after-tax profits, showed marginal movements in the opposing directions.
The former, on one end, rose slightly from Rs 4,115 crores during Q2FY24 to Rs 4,179 crores during Q3FY24, and the latter, on the other end, dipped marginally from Rs 1,016 crores to Rs 996 crores due to increased cost pressure.
As per the latest presentations, the company reported its highest-ever sales of 20,706 units in Q3FY24 exceeding the previous record of 18,162 units in Q3FY23. Moreover, the company also unveiled ‘small commercial vehicles’ at Bharat Mobility 2024, viz, Electric-First Pro Business, available in CNG as well as Diesel.
Eicher Motors Limited is an automobile manufacturer, especially two & three-wheelers, with product types consisting of motorcycles and commercial vehicles.
The motorcycles division, the most significant contributor, produces motorcycles through the “Royal Enfield” brand. The commercial vehicles divisions produce trucks and buses for sale in India and other developing markets through a joint venture with Volvo
Written by Amit Madnani
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