Shares of Eicher Motors Limited jumped over percent 4 percent in the morning trade on March 20 after global brokerage UBS upgraded its rating to 'buy' with as much as 35 percent upside, citing the company's new launches, and lacklustre performance from peers.
At 9.50 am, Eicher Motors stock was at Rs 3,863, up 4 percent from the previous close. UBS analysts have raised their price target on Eicher Motors stock to Rs 5,000, implying an upside of 34.5 percent from the last close.
Despite being aggressively priced, the launches by Harley Davidson and Bajaj Auto's triumph failed to increase volume significantly. As of February 2024, Harley and Triumph's cumulative volume of the models launched stood at around 4,000 units, well below the expected guidance.
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UBS believes that even as competitors have entered the market aiming to challenge Eichers' dominance, none of them have been able to make a significant impact on customers. Rivals have also attempted to outdo Royal Enfield with better specifications and aggressive pricing but haven't been able to match Royal Enfield's qualitative and emotive edge. "These aspects are challenging for competitors to replicate."
As per SIAM data, the company's market share in the premium motorcycle segment has risen despite competition. Figures show that its market share in Q2FY23 stood at 42 percent and increased to 45 percent in Q3FY24.
Not just that, the company is also planning to launch a new bike -- Roadster. Analysts believe that the launch will bridge the performance gap previously seen when compared to the likes of Harley Davidson and Triumph. This new model offers industry-leading performance, especially featuring Royal Enfield's first liquid-cooled engine, anticipated to address concerns regarding engine heating in hot conditions and heavy traffic. "We believe the upcoming 450cc roadster, potentially followed by additional body forms, will stimulate replacement demand among Royal Enfield's 350cc customers.", UBS said in a note.
On exports, the brokerage anticipates a strong rebound in exports for FY25-FY26, led by the ramp-up of the Himalayan 450, the introduction of additional 650cc models, and a recovery in demand across specific end-markets. UBS projections indicate a 25 percent growth in export demand during FY25-26, contrasting with the 23 percent decline observed in FY24.
"We expect Eicher Motors to outperform the industry on volume growth over the medium term. It continues to have a strong launch pipeline, while most key competitors have already launched products," UBS said. It is also expected that Eichers' average selling price will outpace the industry when considering the launch of its new 450cc platform (which could be at a 20-30 percent premium to 350cc series motorcycles) and multiple 650cc launches.
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