Eicher Motors Limited witnessed a significant 4% surge in morning trade on March 20, following a bullish move by global brokerage UBS, which upgraded its rating to ‘buy’. UBS analysts foresee a potential upside of up to 35%, raising the price target on Eicher Motors stock to Rs 5,000. This upgrade comes on the back of Eicher Motors’ new product launches and a relatively lackluster performance from its competitors in the market. Despite aggressive pricing strategies, recent launches by Harley Davidson and Bajaj Auto’s Triumph failed to generate substantial volumes, with cumulative sales of the models hovering around 4,000 units as of February 2024, significantly below market expectations.
According to UBS, despite intensified competition targeting Eicher Motors’ dominance, rivals have struggled to make a substantial impact on customers. Efforts to surpass Royal Enfield with superior specifications and competitive pricing have fallen short, as none have been able to replicate the qualitative and emotive edge that Royal Enfield possesses. UBS underscores these unique aspects as formidable challenges for competitors, contributing to Eicher Motors’ enduring strength in the market.
According to data from SIAM, Eicher Motors has witnessed a remarkable increase in market share within the premium motorcycle segment. Figures reveal that its market share rose from 42% in Q2FY23 to 45% in Q3FY24, showcasing the company’s resilience amidst competitive pressures. Adding to its momentum, Eicher Motors is gearing up to launch a new bike, the ‘Roadster’.
Analysts anticipate that this model will bridge the performance gap observed compared to rivals such as Harley Davidson and Triumph. The Roadster boasts industry-leading performance, featuring Royal Enfield’s first-ever liquid-cooled engine. This innovation is expected to address concerns related to engine heating in hot conditions and heavy traffic, further enhancing its appeal to customers. UBS, in a note, expresses confidence that the upcoming 450cc roadster, potentially followed by additional body forms, will stimulate replacement demand among Royal Enfield’s 350cc customers.
Additionally, UBS foresees a robust rebound in exports for FY25-FY26, driven by the ramp-up of the Himalayan 450, introduction of additional 650cc models, and a recovery in demand across specific end-markets. Projections suggest a 25% growth in export demand during FY25-26, in stark contrast to the 23% decline observed in FY24.
UBS further anticipates that Eicher Motors will outperform the industry in terms of volume growth over the medium term. The company’s strong launch pipeline, coupled with the absence of major product launches from key competitors, reinforces this outlook. Moreover, with the launch of its new 450cc platform, expected to command a premium of 20-30% over the 350cc series motorcycles, and multiple 650cc launches, Eicher Motors is poised to surpass industry average selling prices, driving further growth and market leadership.”
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