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Eicher Motors share price jumps 7% after Q4 profit beats Street estimates; should you buy, hold or sell?

Eicher Motors share price jumped over 7% on Monday after the company on May 13 declared a consolidated profit after tax (PAT) of Rs 610 crore for the quarter ended March 2022, up 16% from Rs 526 crore a year ago.

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Eicher Motors stock has tanked over 4% so far this year. However, brokerages remain bullish and see up to 27% upside going forward.

Eicher Motors share price jumped over 7% on Monday after the company on May 13 declared a consolidated profit after tax (PAT) of Rs 610 crore for the quarter ended March 2022, up 16% from Rs 526 crore a year ago. The auto major’s consolidated revenues rose by 18% to Rs 10,298 crore. Eicher Motors stock has tanked over 4% so far this year. However, brokerages remain bullish and see up to 27% upside going forward, on the back of expansion of Eicher Motors’ (EIM) product portfolio on new improved platforms which will help the company expand its addressable markets. Eicher Motors shares closed at Rs 2,624, up 7.75% on BSE today.

Stock Talk: Should you buy, hold or sell Eicher Motors shares?

Motilal Oswal: Buy
Target price: Rs 2,900; Upside: 19%

Eicher Motors reported in-line results, as the good performance of RE was offset by the miss in VECV. With supply chain issues likely to ease post2QFY23E, the continued product portfolio expansion will aid domestic recovery and support ramp-up in exports, according to analysts at Motilal Oswal Financial Services. “The near-term uncertainties due to supply chain issues notwithstanding, the expansion of product portfolio on new improved platforms will help EIM expand its addressable markets and drive the next phase of growth for RE. We increase our FY23E/FY24E consolidated EPS by 5.5%/4.0% to reflect the better margins for RE and volume upgrades for VECV,” the brokerage said. It maintained a ‘buy’ call on the stock with a target price of Rs 2,900 (premised on Jun’24E SoTP).

IIFL Securities: Buy
Target price: Rs 3,100; Upside: 27%

Analysts at IIFL Securities believe that Eicher Motors is well placed for strong growth in FY23. Eicher’s 4Q Ebitda grew 19% on-year due to stronger than expected gross margin. After a sharp downcycle over the past three years, quarterly Ebitda has bounced back to the FY19 average (peak earnings). Royal Enfield (RE) has seen good ramp-up in exports (+110% in FY22) and non-vehicle revenue (+45% in FY22). “Domestic volumes have been weak, as was the case with the entire 2W industry. However, we are now seeing signs of uptick in the 2W industry. We forecast 26% volume growth for RE in FY23, translating into average monthly volume of 63k. Current domestic retail trends with strong exports make our estimates look achievable,” the brokerage said. IIFL Securities retained its ‘buy’ call on the stock with a target price of Rs3,100.

Yes Securities: Buy
Target price: Rs 2,972; Upside: 22%

Eicher Motors reported an overall in-line set of results in Q4FY22, said YES Securities, maintaining a ‘buy’ rating with a target price of Rs 2,972 per share, implying an upside of 22 per cent. After witnessing severe headwinds over the last 24 months, YES Securities expect Eicher Motors’ volumes to grow hereafter, besides added, the recent launches could be an inflection point for RE (Royal Enfield) as a completely new and improved platform could drive a revival. VECV (VE Commercial Vehicles) would see a cyclical recovery in volume and profit, in turn boosting consolidated PAT CAGR to 46% over FY22-24E, YES Securities said, adding that the stock trades at 24.1x/18.7x FY23E/FY24E consolidated EPS.

JM Financial: Sell
Target price: Rs 2,400; Downside: 1.3%

Analysts at JM Financial services stated that Eicher Motors has passed on the current RM inflation through price hikes and a temporary pause in RM inflation supported margin during 4Q. In addition, increased sales of accessories/spares and better product mix is supporting margins. “The stock is currently trading at expensive 24x FY23 EPS (vs. 15x/18x for HMCL/BJAUT), despite similar RoE profile. We estimate EIM’s standalone EPS to post c.46% CAGR over FY22-24E. We ascribe an 18x 1-yr forward PE to arrive at revised Mar’23 (Sept’22 earlier) fair value of Rs 2,400 (INR 2,300 earlier),” the brokerage said. It maintained ‘Sell’ rating on the stock, saying that successful launch of new models aiding higher volume growth and faster normalisation of semiconductor shortage are key risks to the call.

(The stock recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)

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