Jefferies maintains 'buy' on Eicher Motors, sees 23% upside; shares zoom

Royal Enfield parent Eicher Motors' shares rose sharply on Tuesday after Jefferies maintained its 'buy' call on the stock and raised its price target by Rs 150.

Royal Enfield parent Eicher Motors' shares were in high demand on Tuesday. | Image: Reuters

Royal Enfield parent Eicher Motors' shares surged on Tuesday, breaking out of a three-day losing streak, after brokerage Jefferies maintained its 'buy' rating on the stock while raising its price target by Rs 150 to Rs 4,150. The Eicher Motors stock strengthened by as much as Rs 155.2, or 4.6 per cent, to Rs 3,539 apiece in intraday trade on BSE.

Eicher Motors shares settled 2.6 per cent stronger for the day at Rs 3,472.1 apiece on the bourse. The brokerage's target implies a 22.6 per cent upside in Eicher Motors shares from the previous close.

Should you buy Eicher Motors shares now?

According to Jefferies, it is a good time for investors to buy Eicher Motors shares given the easing of concerns related to competition. The brokerage is of the view that fresh competition is likely to pose a limited impact on Eicher Motors, which has lagged the Nifty Auto index by 24 per cent so far in 2023.

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It also highlighted tailwinds for the company such as a recovery in demand for two-wheelers and industry premiumisation.

During the FY23-FY26 period, the brokerage expects Eicher Motors' earnings before interest, taxes, depreciation and amortisation (EBITDA), and earnings per share (EPS) to expand by 62 per cent and 81 per cent, respectively.

How other brokerages view the Royal Enfield maker

Brokerage	Rating	Price target	Upside/downside vs Monday's price
HDFC Securities	Sell	Rs 3,207	-5.2
ICICI Securities	Buy	Rs 4,039	19.4
Axis Direct	Buy	Rs 3,800	12.3

Meanwhile, Zee Business analyst Kushal Gupta has a fundamental 'buy' call on Eicher Motors shares.

Last week, he suggested investors buy the stock for a target of Rs 3,520 with a stop loss at Rs 3,395.

Here's how the company fared in Q1

Eicher Motors staged a strong show in the first three months of the current financial year. The auto major reported a 50.2 per cent year-on-year increase in consolidated net profit to a record Rs 918 crore for the quarter ended June 30, beating Street estimates. Its revenue grew 17.3 per cent to a record Rs 3,986 crore, and margin improved by 110 basis points to 25.6 per cent, according to a regulatory filing.

According to Zee Business research, Eicher Motors' quarterly net profit was estimated at Rs 855 crore and margin at 24.1 per cent.

Eicher Motors registered sales volume growth of 21 per cent in Royal Enfield, and 12 per cent in VECV, its joint venture with the Volvo Group.

While announcing the results for the April-June period, the company's management said it expected economic growth to drive demand for its commercial vehicles across segments in the near future. It also exuded confidence about maintaining Eicher Motors' market share of more than 90 per cent in the 250-750 cc segment despite increased competition.

Eicher Motors shares

Eicher Motors shares have grown 8.2 per cent on a year-to-date basis, in line with an 8.1 per cent rise in the Nifty but sharply underperforming a 28.7 per cent rally in the Nifty Auto.

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