1:10 Stock Split: Rs 1 Lakh In Eicher Turns To Rs 18 Cr In 15 Years; Share Jumps 18,545%, Buy For Rs 4,661 TP

One of the many perks of a stock split is that it not only makes a share price cheaper but also increases its demand and attracts bulls. A stock splits charm works like magic, especially in the case of Royal Enfield maker Eicher Motors. Invested in this auto player for the long term, most likely you would be a crorepati by now. Eicher is an example why equity shares are the highest return givers compared to any other traditional schemes in the longest run.

Because Eicher's share has rallied by an eye-bulging 18,545.37% in 15 years. The stock has journeyed from below Rs 22 on February 25, 2009 to date.

Last week, on Friday, Eicher's share price ended at Rs 3,925.45 apiece, down by 0.70% with a market cap of Rs 1,07,481.03 crore. The stock is just a couple of hundreds away from hitting its 52-week high of Rs 4,201.70 apiece.

Eicher Motors Stock Split Charm:

Four years ago, Eicher Motors carried its first stock split. The company split its 1 existing equity share into ten shares. The face value of Eicher of Rs 10 was trimmed to Rs 1 when Eicher turned ex-split on August 24, 2020. This led to an increase in a number of shares, and Eicher has been trading on the adjusted stock split ever since.

Because of a stock split, investors who infused Rs 1 lakh in Eicher Motors 15 years ago, are now crorepati.

For instance, if an investor bought Eicher shares fifteen years ago, Rs 1 lakh will give 4,697.04 equity shares at Rs 21.29 apiece which was the level on February 25, 2009. If the investor had not modified its portfolio on August 24, 2020. Due to a 1:10 stock split ratio, 4,697.04 will split into 46,970.4 equity shares (4,697.04 x 10).

And if the investor has continued to hold its 46,970.4 equity shares till now, then their shareholding is now valued at a breathtaking Rs 18.438 crore (46,970.4 X Es 3925.45 share price of February 23, 2024).

There are more gains ahead!

Eicher Motors Target Price:

During Q3FY24, Eicher recorded its highest ever revenue from operations at Rs. 4,179 crores, up 12% compared to Rs. 3,721 crores in the corresponding quarter of FY 2022-23 and EBITDA was Rs. 1,090 crores, up 27% compared to Rs. 857 crores in the same quarter of the previous financial year. The company registered Profit after Tax at Rs. 996 crores, registering a strong growth of 34% in comparison to Rs. 741 crores during the same period last year. Royal Enfield sold 229,214 motorcycles in the quarter, an increase of 4% compared to 219,898 motorcycles sold over the same period in FY 2022-23.

In its research note, Religare Broking on Eicher's performance said, "Eicher Motors revenue from operations grew by 12.3% YoY/1.6% QoQ to Rs 4,179 Cr, led by price hikes and premiumization trend amid subdued volume growth of 3.8% YoY to 248,779 units. Its other income was up by 31.9% YoY and share of profits from JV was up by 78.2% YoY which led the profit to improve by 34.4% YoY to Rs 996 Cr, however, it declined by 2% sequentially."

Religare Broking also said, 1) Parts business revenue for Volvo and Eicher combined was up by 22.3% YoY to Rs 560 Cr. 2) New launches; Himalayan 450 and Shotgun 650 are witnessing good response from customers with healthy bookings. 3) Consistent RE Hunter volume with ~265k since its launch in 2022. 4) The management expects the export market to remain under pressure for the upcoming 2-3 quarters. 5) Heavy Duty Truck and Light Medium Duty Trucks market share stood at 9.6% and 34.5% respectively. 6) VE powertrain sales were up by 8% YoY to 13,596 units. 7) The company aims to launch the new "Sherpa Engine" in the international market which shall aid in volume expansion. 8) The new launches in the upcoming quarters could keep the overhead expenses in a similar range.

On the valuation, the brokerage added, "Despite the recent competitive pressure, EML continues to lead the 300+cc segment and has been posting volume growth consistently. The increased buying sentiments in the 125cc+ category and new launches in the upcoming quarters are expected to aid the company in terms of volume growth. Further, the rise in government expenditure on electrification of buses and the rise in private capex shall aid in volume and revenue expansion in its JV VECV. Factoring this, we estimate its revenue/EBITDA/PAT to grow at a CAGR of 16.3%/19.9%/22.1% over FY23-FY26E and maintain our Buy rating with a revised (upwards) target price of Rs 4,661 valuing it at a PE of 24x on its FY26E EPS."

Further, Sharekhan in its note said, "Post reporting in-line performance with estimated operating performance, management has indicated for an increased traction in enquiries and bookings. RE will continue to introduce new products to enrich its portfolio as it recently launched Shotgun 650 in the domestic market and Himalaya 450cc. Further, it's latest launched Himalayan 450 has been receiving a healthy response in the market as it offers an attractive alternative to its existing customers in the 350cc segment to upgrade a motorcycle. Recently, VECV introduced an electric SCV and is looking to begin delivery of the same by Q1CY2025. Going forward, management is looking for healthy growth in the CV industry in the long term and remains optimistic for the performance in the premium motorcycle segment in the domestic market."

Although RE is expected to remain a key beneficiary of the rising premiumisation trend in the domestic motorcycle market, Sharekhan added, "A rise in competition is the cause of concern as growth in the premium market is expected to be distributed among new players. While the new competition in the premium segment would
expand the market, RE may lose some of its market share due to its high base. We maintain our Buy rating on the stock with an unchanged price target (PT) of Rs. 4,331 on account of its leadership position in the premium motorcycle segment, rising premiumisation, and focus on balanced growth."

Apart from 1 stock split, Eicher has consistently rewarded dividends to its investors. Since June 2001, the company delivered up to 23 dividends. Eicher is among dividend king stocks. However, Eicher has paid no bonuses.

Eicher Motors is the listed parent of Royal Enfield, a global leader in the middleweight motorcycles segment (250cc - 750cc). The world's oldest motorcycle brand in continuous production, Royal Enfield has made its distinctive motorcycles since 1901. Focussed on bringing back simple, yet engaging and accessible motorcycling, Royal Enfield operates in India and over 60+ countries around the world.

With modern development facilities in Leicestershire, UK, and Chennai, India, Royal Enfield makes its motorcycles in Tamil Nadu for the world. In addition to motorcycles, EML has a joint venture with Sweden's Volvo Group - VE Commercial Vehicles Limited (VECV). In operation since July 2008, the company includes the complete range of Eicher branded trucks and buses, exclusive distribution of Volvo Trucks in India, engine manufacturing and exports for Volvo Group, nonautomotive engines and Eicher component business.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.