BackEicher Motors: Up 50% from its 52-week low, is it the right time to buy the stock? Here's what experts say
Eicher Motors: The stock hit its record high of ₹4,740.30 in intra-day deals yesterday (May 14). The auto major has now advanced 50 percent from its 52-week low of ₹3,159.20, hit on July 10, 2023.
PremiumThe last one year has been very impressive for the auto sector on the back of recovering demand reported by a rise in sales volumes as well as exports. The Nifty Auto has outperformed the benchmark Nifty in the last one year as well as in 2024 YTD.
The sectoral index has risen over 62 percent in the last one year and over 22 percent this year so far as against an around 21 percent and over 2 percent rise in the benchmark Nifty, respectively.
"After rebounding strongly in the last couple of years, both 2Ws and PVs are anticipated to witness softer growth in FY25. We expect PVs to register a 5 percent volume growth in FY25, while 2Ws are likely to post a 9 percent volume growth in FY25. Conversely, CVs have already witnessed a weak demand in FY24 (flat YoY) over a relatively high base. Given an anticipated slowdown in the run-up to elections, we expect a revival in CV demand to begin with a lag of a quarter. Hence, we forecast CVs to report 6 percent volume growth in FY25 driven by the bus segment and largely back-ended. Thus, while growth rates for most segments are likely to taper down to single digits, the auto industry is likely to be the fastest growing sector vs. other developed regions globally, which are witnessing recessionary trends," predicted brokerage house Motilal Oswal.
Read here: Eicher stays ahead with upgrades but rivals are catching up
While the overall market sentiment is in the red this month, the auto index has risen 1.2 percent in May so far, extending gains for the 7th straight month since November 2023. In this period, the index has soared 43 percent.
The auto index also hit its new high of 22,994.55 earlier this month on May 9, 2024. The majority of the Nifty Auto constituents have also been positive this year. Two-wheeler stock Eicher Motors, which recently declared its March quarter (QFY24) results, is one of them.
The stock hit its record high of ₹4,740.30 in intra-day deals yesterday (May 14). The auto major has now advanced 50 percent from its 52-week low of ₹3,159.20, hit on July 10, 2023.
It has added 27 percent in the last 1 year and over 11 percent in 2024 YTD. The stock has been flat but in the green, up 0.36 percent in May so far, rising for the third straight month. It jumped 14.4 percent in April and 6 percent in March. However, the scrip was in the red in the first 2 months of this year, down 1.3 percent in February and 7.3 percent in January.
Read here: Tata Motors erases domestic debt, targets net-cash goal for JLR in FY25
Meanwhile, in the long term, the stock has surged over 91 percent in the last 3 years, 131 percent in 5 years, and skyrocketed 591 percent in the last 10 years.
Earnings
In the March quarter, the commercial vehicle and Royal Enfield motorcycles manufacturer, reported a consolidated net profit of ₹1,070.45 crore, up 18.2 percent year-on-year (YoY) from ₹905.58 crore in the year-ago quarter. The company’s total revenue from operations in Q4FY24 also increased 11.87 percent YoY to ₹4,256.04 crore versus ₹3,804.32 crore in the same period last year.
At the operating level, Eicher Motors posted Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) growth of 20.88 percent at ₹1,129 crore in the March quarter as compared to ₹934 crore in the corresponding quarter of the previous financial year.
Read here: Eicher Motors Q4 Results: Net profit rises 18% YoY to ₹1,070 crore; announces dividend of ₹51 per share
During the quarter, Royal Enfield recorded sales of 227,925 motorcycles, up by 6.17 percent from 214,685 motorcycles sold during the same period in FY23. For the full year FY24, Royal Enfield registered motorcycle sales at 9,12,732 (standalone), up by 9 percent from 834,895 (standalone) in FY23.
The board of Eicher Motors also recommended a final dividend of ₹51 per equity share of face value of Re 1 each for the financial year ended March 31, 2024, subject to the approval of the shareholders.
The stock has performed exceptionally well in recent times. Will this stellar performance of the auto major continue? Here's what technical and fundamental experts say:
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Technical View
Om Mehra, Technical Analyst, SAMCO Securities
Eicher Motors Ltd has displayed a pattern of higher highs and higher lows in the daily time frame. Despite trading within a range of ₹4,528-4,743 for weeks, the stock remains resilient during consolidation. Eicher Motors is trading above its 20-day and 50-day moving averages (DMA). In the last few days, the delivery volume has marginally increased. This phase suggests an accumulation period, indicating that the primary trend remains strong. The Relative Strength Index (RSI) has consistently held above the 70 level, signalling a potential strength in the stock. Despite ongoing volatility in the market, Eicher Motors stock has remained resilient. Investors may consider accumulating the stock in stages for a long-term investment horizon.
Rajesh Palviya, SVP - Technical and Derivatives Research, Axis Securities
The stock is in a strong uptrend forming a series of higher tops and bottoms representing sustained strength. With the previous session's low (4528), the stock has recaptured its 20-day SMA (4519) and rebounded sharply which confirms the bullish trend. On the weekly chart, the stock is trending higher in an up-sloping channel. Gradual increase in volumes signifies increased participation. The weekly and monthly "band bolliger" buy signal shows increased momentum. We recommend traders and investors to hold and continue longs with the expected upside of ₹4900-5100 levels. On the other hand, the short-term support zone is placed around ₹4500-4350 levels. The daily, weekly, monthly, and quarterly RSI is in a positive terrain, which reconfirms rising strength across all the time frames.
Read here: TVS Motor share price climbs nearly 6% after Q4 result; should you buy?
Rohan Shah - Technical Analyst, Religare Broking Ltd
Eicher Motors has registered a fresh breakout from the brief consolidation and has reclaimed record-high levels. The breakout from the range has accomplished with a decent surge in volumes with supportive momentum, highlighting a bullish tone to continue. Following the price pattern, we expect the stock to inch higher towards ₹4850-5000 levels, provided stock manages to sustain above ₹4620 levels on a closing basis.
Fundamental View
Motilal Oswal: Post the auto major's March quarter earnings, the brokerage has downgraded the stock to ‘sell’ with a target price of ₹4,020, implying an almost 13 percent potential downside. As per the brokerage, RE is likely to face rising competitive pressures in the coming years, both in domestic and export markets, potentially limiting its volume growth prospects. MOSL has cut its FY25E/FY26 EPS estimates by 4 percent/7 percent as it expects RE margins to be under pressure, led by rising competitive intensity.
Furthermore, the brokerage has factored in a 10 percent volume CAGR for RE over FY24-26E. It now sees margins declining 70 bps by FY26E as any benefit from improving mix (higher spares and apparel sales) is likely to be offset by the rising competitive intensity. Overall, MOSL expects EIM to deliver 12 percent earnings CAGR over FY24-26.
Read here: Q4 Results Review: 5 companies contribute 75% to Nifty earnings growth
Choice Broking: The brokerage has retained a ‘buy’ call on the stock with a target price of ₹4,975, implying an 8 percent potential upside.
"We remain positive on the stock given led by increasing accessories revenue, expanding RE's reach in the international market, expanding presence in underpenetrated markets (Tier II & III cities), and a healthy launch pipeline across the bike category and revival of CV segment post general election. We expect, over FY24-27 VECV (VE Commercial Vehicles, a joint venture between Volvo Group and Eicher Motors) segment to perform well due to modern, connected, and efficient product portfolio and increasing touchpoints along with site support backed by faster Uptime Promise," it said.
Moreover, a pick-up in export retail is showing healthy traction, going forward performance of export volume is key monitorable, it noted, adding that RE is on track to finding its own growth path in coming years followed by new launches across the categories of bikes like roadster, cruiser, classic, adventure with newly developed platforms and aiming to uplift the riding industry by product innovation. Further geographical expansion in the global market will pave the wave in the long run for sustainable growth, said the brokerage.
Read here: Q4 Results Today: Mankind, LIC Housing Finance and 82 others to post earnings
Prabhudas Lilladher: Despite the recent competitive pressure, EIM continues to lead the premium segment and has been posting steady volume growth. The increased buying sentiments in the 125cc+ category coupled with its strong presence in the segment as well as its robust product portfolio, shall continue to deliver healthy operational performance. The stock currently trades at a PE of 25.3x on its FY26E EPS, stated the brokerage.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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