Sell Eicher Motors; target of Rs 5846: Motilal Oswal

Motilal Oswal's research report on Eicher Motors

Eicher's 2QFY26 consolidated PAT at INR13.6b was slightly lower than our estimates of INR14.4b, due to lower-than-expected margins in both segments. Despite the strong 43% YoY growth in volumes, margins declined 140bp YoY to 24.9% owing to Eicher’s focus on growth over profitability. The robust domestic volume growth for RE in FY26 so far has largely been a function of GST rate cut benefits. However, demand seems to have now normalized post an initial surge in pent-up demand. Further, given that management would continue to focus on “growth” over “profitability,” it would mean that margin upside is likely to be capped from here on. We factor in RE to post a 14%/14%/12% revenue/EBITDA/PAT CAGR over FY25 28E. Given the expected slower earnings growth,

Outlook

We see no reason for the stock to trade at premium valuations. We reiterate our Sell rating with a TP of INR5,846. We value RE at 26x Sep-27E EPS and VECV at 11x EV EBITDA..