Eicher Motors slumps 3%, brokerages sound caution as competition revs up

Shares of Eicher Motors Limited traded over 3 lower to Rs 3,726 on February 14 despite better-than-expected Q3 results, as brokerages issued caution calls and muted the target prices, citing persistent competition in the premium segment.

The stock closed at Rs 3,854, up o.4 percent, on February 13. In the last three months, it has given a return of about 6 percent to the exchanges.

In the third quarter, the maker of the Royal Enfield bikes reported a 34.43 percent year-on-year surge in consolidated net profit, reaching Rs 995.97 crore, largely aided by a combination of higher volumes and price hikes across its product lines. The company's revenue from operations grew 12.28 percent to Rs 4,179 crore in the third quarter of FY24, while operating margins surged to 26.08 percent from 23.03 percent.

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What should you do with the stock?

Global brokerage firm Morgan Stanley is 'underweight' on the counter and has assigned a target price of Rs 3,209. This implies a downside potential of 17 percent from the last close of Rs 3,854. "The company posted a good set of numbers, slowing growth and rising competitive pressures keeps us underweight," it said in a report.

Nomura has assigned a 'neutral' call on the Eicher stock and a price target of Rs 3,769. That's a downside of about 2 percent from the last close. "Slowing retail and rising competition could impact more in FY25," analysts at the firm said. Nomura further added that the success of new launches can drive up the average selling prices further.

On the other hand, Jefferies has issued a 'buy' call and a price target of Rs 4,900, an upside potential of over 27 percent. "The company should benefit from potential two-wheeler demand recovery and premiumisation," the brokerage firm said. However, Jefferies also said that it sees an impact from Hero MotoCorp's Harley Davidson and Bajaj Auto's Triumph.

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