Moneycontrol
Feb 14, 2017 01:55 PM IST | Source: Moneycontrol.com

Hold Eicher Motors; target of Rs 24095: Axis Direct

Axis Direct recommended hold rating on Eicher Motors with a target price of Rs 24095 in its research report dated February 07, 2017.

Hold Eicher Motors; target of Rs 24095: Axis Direct


Axis Direct's research report on Eicher Motors


The management indicated that Royal Enfield (RE) order book remains strong (waiting period still 2-3 months) and it continues to be almost unscathed by demonetization. Q3 EBITDA was inline, as strong RE margin (31.8%) offset sluggish VECV margin (6.9%). Volume run-rate of 720k p.a. would increase to 900k by FY19post the new plant. With rising scale and share of spares / accessories, we expect the margin to improve further (to 34%).


Outlook


We continue to like Eicher for structural growth drivers in RE (both on volumes and margin). However, our SoTP (which values RE at 20x FY18 EBITDA; works out to 30x FY18 PE) still struggles to find upside from the current level. Our estimates are largely unchanged, and we maintain HOLD rating with SoTP based TP of Rs 24,095/share.

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