Eicher Motors soars 7% in a weak market on solid Q4 perforance

F&O View: Options data suggest likely resistance for the stock in the range of Rs 3,670 - 3,750; Support Rs 3,500 - Rs 3,550.

Shares of Eicher Motors, the parent company of Royal Enfield motorcycles, vroomed nearly 7 per cent to hit a high of Rs 3,647 in an otherwise weak markt on the back of strong volume after the company reported record revenue growth in Q4.

At 09:45 AM, the stock was up 6.5 per cent at Rs 3,629 on trades of around 80,000 shares as against the two-week average volume of around 9,900-odd shares on the BSE. Meanwhile, the S&P BSE Sensex shed 0.5 per cent or 301 points to 61,603.

Eicher Motors on Thursday reported a solid 48 per cent growth in net profit for the quarter ended March 2023 at Rs 906 crore when compared with to Rs 610 crore in the same period a yea ago. 

The company recorded its the highest-ever revenue from operations; at Rs 3,804 crore, up 19.1 per cent from Rs 3,193 crore in the corresponding quarter of FY22. EBITDA was Rs 934 crore in Q4 FY23, up 23.3 per cent compared to Rs 757 crore in the same quarter of the previous financial year. Royal Enfield sold 214,685 motorcycles in Q4 FY23, up 17.9 per cent from 182,125 in the corresponding quarter of FY22.

"We have registered our best-ever sales performance of t 834,895 units (up by 38.4 per cent from 6,02,268 in FY 2021-22) and up from the previous best performance in 2018-19. During the year, Royal Enfield also crossed the 100,000 export shipments milestone for the first time," said Siddhartha Lal, managing director of Eicher Motors. READ MORE

With recent softening in raw material inflation, analysts at JM Financial suggest that the margin pressure is expected to be largely over. With the improvement in underlying demand sentiment (esp. in premium segment) and product interventions, they believe the company is back on the growth trajectory.

"Cost control initiatives and positive operating leverage is expected to support margin performance. We ascribe 25x one-year forward PE for RE and 12x 1-year forward EV/EBITDA for VECV to arrive at target price of Rs 4,050. Maintain BUY," they wrote in a post result note.

EIM remains Prabhudas Lilladher's preferred pick in the two-wheeler space as the brokerage anticipates volume growth from new product launches, higher export revenue mix, and increase in mix of spares and merchandise revenue to aid both revenue growth and margin expansion going ahead. They maintain a ‘buy’ rating with a revised sum-of-the-parts (SoTP)-based target price of Rs 4,030 (at 26x Mar-25E standalone EPS and 12x EV/EBITDA for VECV).

The stock has gained 23 per cent since the start of this fiscal year, while the benchmark index has moved up around 5 per cent.

The stock is also traded in the futures & options segment on the NSE. As per the options data for May series, the stock has maximum build-up of positions (open interest) at the 3,600 and 3,700 Calls. Thus, indicating possible resistance in the range of Rs 3,670 - Rs 3,750.

Notable open interest in Puts is at Rs 3,300, with fresh build-up seen at Rs 3,600 and Rs 3,500. Thus, indicating possible support in the range of Rs 3,500 - Rs 3,550.