Eicher Motors Ltd, the manufacturer of Royal Enfield motorcycles, saw its shares plunge nearly 7% on Monday after the Eicher Motors’s March quarter earnings missed Street estimates.
Its net profit was up 18.1% year-on-year to Rs 544.8 crore. However, revenue fell to Rs 2,500.08 crore as against Rs 2,528.01 crore in the year-ago quarter.
Royal Enfield also reported a volume decline of 14% on a year-on-year basis in the March quarter. Eicher Motor Ltd shares further declined 2% to Rs 18,370 apiece on Tuesday morning.
Here’s what analysts and brokerage houses are suggesting about the Eichers Motors stock:
Kotak Institutional Equities: After Eicher Motors Q4 results, Kotak has assigned a ‘sell’ rating on the stock, cutting the target price to Rs 16,200 from 18,400 per share. It said volume outlook remains quite weak for Eicher Motors, with the pressure likely to persist over the next two years.
Kotak Institutional Equities cut FY20-21 EPS (earnings per share) estimates for the company by 9-14%, led by 9-13% cut in its volumes. It also reduced FY20-21 margin estimate by 70-110 basis points.
CLSA: CLSA maintained it’s ‘outperform’ rating on Eicher Motors Ltd after the March quarter results but slashed its target price to Rs 22,500 from Rs 23,900 earlier.
The global investment bank slashed its FY21 EPS by 12-14%. CLSA also said that the near-term volume outlook remains weak given subdued auto demand. However, the global investment bank continues to believe in Royal Enfield’s product franchise. Royal Enfield has headroom for long-term growth, said the CLSA note, but continued earnings cut is a drag on the stock, it said.
Prabhudas Lilladher: Prabhudas Lilladher maintained its ‘hold’ rating on the Eicher Motors stock with a target price of Rs 20,161. It said while the overall performance for Eicher Motors over the March quarter was broadly in line with estimates, its operating margins at 27.4% were disappointing.
The brokerage firm added that the management production target of 950,000 units for FY20, implying a volume growth of nearly 15% over FY19 volumes, looks ambitious. Given the muted industry outlook, coupled with the product fatigue faced at the Classic 350 model, Prabhudas Lilladher said it remained sceptical of this FY20 target and continue to build in 4% volume growth for FY20 at nearly 862,000 units.