Brokerage firm Nirmal Bang is betting on the stock of Eicher Motors, the parent company of Royal Enfield, says accumulate for good returns. Royal Enfield has successfully plugged the product portfolio gap by introducing the Hunter 350 (new model) and has extended its reach to those customers, to which it was not catering earlier.
Stock To Accumulate: Target Price
The Current Market Price (CMP) of Eicher Motors is Rs. 3,665. Nirmal Bang has estimated a Target Price for the stock at Rs. 3918. This stock has the potential to give a 6.90% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 100,405 crore.
|Current Market Price (CMP)||Rs. 3,665|
|Target Price||Rs. 3918|
|Potential 1 year return||6.90%|
|52 week high share price||Rs. 3,787.25|
|52 week low share price||Rs. 2,159.55|
New launch -Hunter 350, Royal Enfield's new model
Hunter 350 is attracting higher interest from the younger set of customers and first-time buyers besides addressing the affordability concerns. Hunter 350 is cannibalising volume of the Classic 350 and Meteor to the extent of ~40%. Hunter 350 is expected to add an incremental volume of ~10k-15k/month. Hunter 350 has also attracted interest from the customers of Bajaj Pulsar, TVS Apache and Jawa due to an array of features and aggressive pricing.
Stock Valuation: Nirmal Bang
Nirmal Bang, "We continue to remain upbeat about volume growth from Royal Enfield in both domestic as well as exports market. Despite the rising share of lower margin products, we don't see a major impact on profitability on the back of improving utilization and moderating commodity costs. We are thus building in Revenue/EBITDA/EPS CAGR of 19%/32%/31% over FY22-25E. We maintain accumulate on Eicher. We are valuing Royal Enfield's standalone business at 28x Sept'24E EPS (26x earlier) and VECV at 12x EV/EBITDA on Sept'24E to arrive at a target price of Rs. 3,918."
Key upsides of the stock
The company's supply chain constraints have largely been resolved. Financing availability has improved significantly; aggressive financing options available now. Series of new launches in 450cc and 650cc are expected over the next 6-12 months. Studio store is supportive to the main store; designed primarily to provide ancillary services and is helpful if it is backed by a large full-scale store.
The company's revenue in FY22 was recorded at Rs. 101,229 mn, which is expected to be at Rs. 135,513 mn in FY23. Their EBITDA in FY22 stood at Rs. 21,136 mn, which is expected to be at Rs. 33,268 mn in FY23. The company's adj. PAT in FY22 was recorded at Rs. 15,862 mn, which is expected to be at Rs. 25,035 mn in FY23.
Eicher Motors Limited is the listed parent of Royal Enfield, the global leader in middleweight motorcycles. 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 Chennai, Tamil Nadu for the world.
The above stock was picked from the brokerage report of Nirmal Bang. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.