Prabhudas Lilladher recommended Hold rating on Eicher Motors with a target price of Rs 23137 in its research report dated November 12, 2018.
Prabhudas Lilladher's research report on Eicher Motors
Eicher Motors' (EIM) Q2FY19 consolidated performance was broadly in-line with our expectations. However, given that most of the high volume models (350cc variants) are now readily available and there is stagnation in demand, we don't expect RE to continue to be immune to the overall domestic motorcycle demand scenario. Additionally, on top of it, RE for the first time would soon have a direct competitor for its Classic 350. The company is increasingly emphasizing on expanding its presence in the international markets, which we feel would be long drawn strategy with no major volumes expected in the near to medium term and would be a drag on the margins. Volvo Eicher Commercial Vehicles (VECV) demand could benefit on account of pre buying related to BS-6 emission norm change. To factor in the demand challenges, no strong order book and expected increase in competition, we reduce our RE volume and EBITDA margins estimates by 4/6% and 240/210bps respectively for FY19/20.
We downgrade to 'HOLD' with a target price of Rs23,137, at 27x FY20E EPS (earlier 31x FY20E EPS). At CMP, the stock trades at 25.6x FY19E and 22.7x FY20E consol EPS.
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