Moneycontrol Bureau
Brokerage firm Quant is betting big on Eicher Motors after it posted December quarter results. The Royal Enfield manufacturer's net profit jumped 59.76 percent to Rs 153.77 crore in Q3 FY15. Quant has increased target price on the stock to Rs 18700 from Rs 17100, reiterating a buy rating.
According to Quant estimates, Eicher Motors' FY16E/FY17E earnings per share (EPS) may touch Rs 572/ Rs 759.1. It expects robust consolidated EPS CAGR (above 80 percent over CY14-FY17E) on back of commercial vehicle cycle recovery, robust demand in Royal Enfield and rising margins on an improving scale.
"Earnings were below consensus and Quant estimates, mainly due to higher R&D spending. Going ahead, it has indicated that it would increase focus on R&D (new product and engine development) by setting up technical centres in India and UK," Quant says in a note.
The brokerage firm feels that CV cycle is likely to recover on the back of uptick in replacement demand, improving macros, better freight operator profitability and low base.
However, it also warns that delay in CV cycle recovery, major decline in consumer sentiment impacting growth of Royal Enfield volumes and increase in input commodity costs are the key risks.
Meanwhile, its net sales rose to Rs 2225.94 crore for the quarter, as compared to Rs 1,663.96 crore during the same period of previous fiscal. The company's board has also approved a proposal to increase the aggregate foreign institutional investment limit, under the portfolio investment scheme, to 49 percent of the company's total paid up share capital.
On Monday, the stock closed at Rs 16,109.45, down Rs 132.55, or 0.82 percent on the BSE.
(Posted by Nasrin Sultana)
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