Sell Eicher Motors; target of Rs 3400: Emkay

Emkay's research report on Eicher Motors

EIM’s results were in line with estimates; revenues/EBITDA/PAT were up 12%/21%/18% YoY with margins up 43bps QoQ to 26.5% on lower RM. For EIM’s Royal Enfield (RE) brand, we believe growth remains a challenge with: i) recent launches like Himalayan 450 yet to take off meaningfully, ii) concerns around incremental growth potential from upcoming 450cc launches, given the segment’s limited size, and iii) replacement/upgrade demand for RE remaining elusive. We raise FY26E EPS by ~5% on ongoing 2W recovery and consequent margin improvement (build-in 9% PAT CAGR over FY24-26E).

Outlook

We retain SELL with revised TP of Rs3,400 (Rs3,250 earlier) at an unchanged 20x FY26E PER + the stake in VECV. HMCL is our preferred pick in 2Ws given its stronger growth visibility (on new launch success of Xtreme 125R) and much better risk-reward.