Buy Eicher Motors; target of Rs 15500: Emkay

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26 Aug, 2025 12:21

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Emkay's research report on Eicher Motors

Consolidated operating performance 5% above estimate, driven by a beat in VECV operations this time; Royal Enfield performance in-line

Royal Enfield business EBITDA margins stood at 25.0% (+570 bps YoY, +10 bps QoQ) while VECV EBITDA margins at 6.9% (+60 bps YoY, +30 bps QoQ) was ahead of est

We have upgraded our CY15/CY16E EPS estimates by 4%/14% as demand continues to outstrip supply and as the management has further upped its production guidance

We upgrade our target multiple for the RE business to 30xCY16 which is still a 0.8x PEG over CY14-CY17E estimate; besides, the cult brand and the strong FCF generation are structural positives

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Upgrade to BUY with an SOTP target of Rs 15,500. Stock trading at 24x CY16 P/E

"We up our CY15/CY16E EPS estimate by 4%/14%, driven by enhanced capacity and stronger than anticipated demand momentum which would lead to a 40% earnings growth CAGR over CY14-CY17E. We upgrade our target multiple for the RE business to 30xCY16 which is still a 0.8x PEG over CY14-CY17E estimate; besides, the cult brand and the strong FCF generation are structural positives. Our CY16 SOTP based TP now stands at Rs 15,500, where we value the Royal Enfield biz at 30x P/E (see our DCF analysis in Exhibit 6), VECV biz at an early cycle multiple of 9x EV/EBITDA and MDEP biz at DCF value of Rs 295. The stock is currently trading at 33x/24x PER on CY15/16 estimates. Upgrade to BUY", says Emkay Global Financial Services research.

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