The share price of Eicher Motors is in focus today. The brokerage house Motilal Oswal Financial Services, in its latest report, sees a downside of 1% on this auto sector stock. The brokerage believes that the stock is currently fairly valued and faces several headwinds that could limit further growth in the near term. Despite the stock surging over 5% in Monday’s trade, the brokerage firm maintained a ‘Neutral’ rating with a target price of Rs 6,912.
Here are key reasons why Motilal Oswal is cautious on Eicher Motors:
Pressure on margins
As per the brokerage house report, the company’s management is currently prioritising volume growth over profitability. This strategy, combined with a recent upsurge in input (commodity) costs, is expected to keep margins under pressure. In fact, margins have already declined by about 150 basis points from their peak in FY24.
“Over the last couple of years, Royal Enfield management has started to focus on driving volume growth, even if it comes at the cost of margins. This was visible with the launch of recent RE upgrades, which came at a minimal incremental cost increase while offering much higher features,” added Motilal Oswal report.
Uncertain export outlook
While domestic demand is healthy, Royal Enfield’s exports have slowed down due to geopolitical conflicts and tariff-led uncertainties in key markets like the US and Mexico.
Motilal Oswal expects exports to grow at a much slower pace (9% CAGR) compared to the domestic business (14% CAGR) through FY28.
“Demand in both the US and Mexico has slowed down due to the uncertainty about tariffs. Further, demand from some of its other key export markets, such as Europe, also remains weak due to the adverse macroeconomic conditions in the region. Due to this, the export run rate has remained in the 10k per month range for the last 12 months. Overall, the export outlook remains uncertain,” said Motilal Oswal.
Incremental costs
For Q1FY27, the company’s management expects commodity cost pressures to reach 3-3.5% of revenues. While some of this is being offset by price hikes, it may not be enough to fully protect margins.
“Moreover, given that FY27 is the company’s 125th year, we expect management to launch an elevated brand campaign to celebrate the same. We expect RE to continue to focus on driving demand, which is likely to keep margins under pressure going forward,” added the brokerage house report.
Eicher Motors share price performance
The share price of Eicher Motors has risen 7.2% in the last five trading sessions. The stock has surged 3.6% in the past one month and 3.24% in the last six months. Eicher Motors has given a return of 37% over the previous one year.
Eicher Motors Q4FY26
Eicher Motors reported a consolidated net profit of Rs 1,520 crore in Q4FY26 compared to Rs 1,362 crore in the same period a year ago, a growth of 12% year-over-year.
The Royal Enfield maker recorded a total revenue growth of 16% YoY to Rs 6,080 crore in Q4FY26 as against Rs 5,241 crore posted in the corresponding quarter of the previous financial year.
For Q4FY26, the company’s Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) surged 20% to Rs 1,514 crores. Healthy Royal Enfield sales volume at 3.14 lakh units, an increase of 12% YoY.
Also, the company’s board recommended a final dividend of Rs 82 per equity share for FY26.
All in all, while the company is performing well operationally in the domestic market, the combination of rising costs, export uncertainty, and a ‘fair’ valuation led the brokerage house to predict a slight decline from its current levels.