Emkay Global Financial's research report on Eicher Motors
EIM’s Q1 margins and earnings were a beat (margins up ~110bps QoQ to 25.6%; our estimate: 24.5%), with continued pricing action and cost initiatives driving improved profitability. Despite recent concerns around aggressive competitive launches (refer our update), we believe Royal Enfield’s (RE) robust positioning (impressive legacy combined with modern-day reliability) and strong upcoming product pipeline (refer Exhibit 5) would help sustain the structural domestic franchise revival story (started last year with Hunter). This, along with ramp-up in exports, better mix and softer commodities, would drive ~21% FY23-26E EPS CAGR.
Outlook
We have introduced FY26 estimates with a marginal upgrade in FY24E/FY25E EPS (largely reflecting Q1 margin beat). We retain BUY with an unchanged SOTP-based TP of Rs4,000/share (25x PE/20x P/E for motorcycle/CV business on FY25E).
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