Eicher Motors, the parent company of Royal Enfield, saw a significant uptick in its stock performance on September 26, with shares surging by nearly 4 percent. This surge made it the top-performing stock on the NSE Nifty 50.
As of 1:50 p.m. on that day, the stock was trading at Rs 3,500, reflecting a 3.35 percent increase from its closing price on the previous trading day on the NSE.
This boost in share value can be attributed to the positive outlook shared by global brokerage firm Jefferies regarding Eicher Motors and its diverse businesses.
Jefferies expressed confidence in Eicher Motors by raising its target price and designating it as a preferred investment choice. Their optimistic stance is underpinned by several key factors:
1. Reduced Competition: Jefferies is of the view that concerns regarding stiff competition have diminished for Eicher Motors.
2. Reviving Demand: The two-wheeler market is experiencing an upswing in demand, and Eicher Motors is poised to benefit from this trend.
3. Premium Appeal: Eicher Motors is renowned for manufacturing premium motorcycles, aligning well with the evolving preferences of Indian consumers.
4. Exports: The company is also witnessing growth in its export operations, further contributing to its positive outlook.
Jefferies analysts have bestowed a 'buy' rating upon Eicher Motors and raised its target price to Rs 4,150. This revised target price suggests the potential for a 22.5 percent increase in the stock's value from its closing price on September 25, marking an improvement from the previous target price of Rs 4,000.
Regarding Royal Enfield, the iconic motorcycle brand owned by Eicher Motors, Jefferies is confident in its ability to capitalize on a potential surge in two-wheeler demand in India. This confidence stems from Royal Enfield's offering of distinctive motorcycles and its strong brand reputation. As more Indian consumers seek premium bikes, Royal Enfield is well-positioned to benefit.
In terms of valuation, Jefferies values Royal Enfield at 25 times its price-to-earnings ratio (PE), up from the previous valuation of 24 times PE. Additionally, the commercial vehicle business is valued at 5.5 times its price-to-book ratio (PB) for FY25.
