Stock in Action Eicher Motors India 14 November 2024

Highlights

1. Eicher Motors Q2 FY25 results show strong earnings & increased profitability.

2. Eicher Motors' net profit growth is driven by improved operations & high demand.

3. Royal Enfield sales highlights show a sharp increase in unit sales with new model launches.

4. Eicher Motors stock analysis indicates strong fundamentals for long-term investors.

5. Eicher Motors revenue growth reflects high demand in domestic & international markets.

6. Royal Enfield new launches contribute to growing market share.

7. Eicher Motors commercial vehicle sales have risen significantly in multiple segments.

8. Eicher Motors brokerage overview shows positive ratings for its Q2 performance.

9.  Royal Enfield electric bike launch is expected to drive interest & expand its portfolio.

10. Eicher Motors investment potential is strong with solid performance & future growth.

Why Eicher Motors Stock is in the News?

Eicher Motors, the parent company of the iconic Royal Enfield brand, recently made headlines due to its Q2 FY25 earnings, which reflected steady growth despite market fluctuations & intensified competition. The company reported an 8% year-on-year increase in net profit & has drawn attention from major brokerages who have shared varied views on the stock's outlook. The rally in Eicher Motors' shares, reaching a peak of 7.5% on the BSE post earnings announcement, underscores the optimism surrounding its growth trajectory, with a strong focus on product innovation, volume recovery in Royal Enfield sales, & strategic expansion into electric mobility.

Q2 Result Highlights of Eicher Motors

In its Q2 FY25 earnings report, Eicher Motors delivered a year-on-year increase of 8% in standalone net profit, reaching ₹1,010 crore. Standalone revenue from operations increased by 7% to ₹4,205 crore compared to the same period last year. However, on a consolidated basis, Eicher Motors posted a net profit of ₹1,100 crore for the quarter, up 8.27% year-on-year, but slightly down from ₹1,101.46 crore in the previous quarter. Consolidated revenue from operations rose by 3.8% to ₹4,186.38 crore, reflecting healthy growth despite cost pressures. Notably, expenses grew by 5.84%, up to ₹3,368.55 crore. 

Eicher Motors’ EBITDA remained flat, recording ₹1,088 crore. Despite meeting expectations year-on-year, quarter-over-quarter comparisons reflected a slight shortfall. This outcome reflects effective cost management amidst market challenges & the company's steady ability to maintain profitability.

Q2 Operational Highlights of Eicher Motors

Eicher Motors has demonstrated resilience in Q2 FY25 by optimizing its product mix & focusing on higher Average Selling Price (ASP) to bolster revenue in the two-wheeler segment. Despite seasonal dips in demand, the company managed to increase its sales margins. VE Commercial Vehicles (VECV), the commercial vehicle arm of Eicher Motors, posted its highest ever Q2 operational revenue, supported by an 8% growth in sales volumes year-on-year. 
Key operational highlights include VECV’s increased market share in the truck segment & the continuous rollout of Royal Enfield’s 650cc platform, which has been well received in the market. The recently introduced electric bike “Flying Flea” reflects Eicher Motors' focus on expanding into electric mobility & catering to a growing environmentally conscious customer base.

Brokerages Overview of Eicher Motors

The Q2 FY25 performance of Eicher Motors has attracted a range of opinions from brokerages. Jefferies has rated Eicher Motors as a ‘buy,’ with a target price of ₹ 5,500, citing recovery in Royal Enfield volumes as a positive indicator & a potential 20% upside in the stock. Jefferies highlights easing competition & market demand for Royal Enfield’s 650cc models as major growth drivers for Eicher. 
In contrast, Goldman Sachs & Citi have both adjusted their target prices slightly downward, citing that Q2 EBITDA missed expectations. Goldman Sachs remains optimistic but cautious, noting the importance of continuous product innovation to stay competitive in the two wheeler market. Despite these adjustments, the recent correction in Eicher Motors' stock & its ongoing product releases offer promising growth potential. 

Royal Enfield Operational Highlights of Eicher Motors

The Royal Enfield segment, a major contributor to Eicher Motors' revenue, maintained robust performance with sales of 2,25,317 motorcycles in Q2 FY25. While this represented a slight decrease from 2,29,496 units sold in the same quarter last year, the ASP increase helped mitigate the impact of reduced sales volumes. Royal Enfield’s new 650cc models have contributed significantly to demand recovery, & Eicher Motors anticipates growth in this premium segment with more model launches in the pipeline.

Siddhartha Lal, Managing Director of Eicher Motors, emphasized the brand's focus on tapping into newer markets & product categories, including the recently launched electric bike under the brand “Flying Flea.” This move not only aligns with Eicher Motors’ expansion strategy but also marks its entry into the burgeoning electric mobility market, adding a new dimension to Royal Enfield’s offerings & positioning it to cater to both traditional & environmentally conscious customers.

Conclusion

Eicher Motors' Q2 FY25 results highlight its stable financial performance amidst market headwinds, marked by consistent profit growth & strategic investments in product innovation. Royal Enfield’s ability to maintain steady ASP & volume recovery in the 650cc segment, along with VECV’s strong quarterly sales, positions Eicher Motors for sustained growth.