Strong Financials, But Growth Concerns Remain
Eicher Motors, the manufacturer of the iconic Royal Enfield Bullet motorcycles, reported strong financial results for the first quarter of FY25 (Q1FY25). However, analysts remain concerned about the company's future growth prospects due to a decline in demand and new launches by rivals.
Declining Sales: The Bullet 350 model witnessed a 14% volume drop in Q1FY25, while the Hunter 350 saw an 8% decline. This indicates limited acceptance of the new models and intensified competition from Bajaj-Triumph, Hero-Harley, TVS Motor, Honda, and Classic Legends.
The Guerrilla model has received a lukewarm response, suggesting structural growth challenges for Royal Enfield.
Analysts predict a moderate revenue/EBITDA CAGR of 4%/8% for FY24-27 due to a high base, reduced infrastructure spending, and easing pent-up demand in the commercial vehicle segment.
Revenue and Profit Growth: The company's topline or revenue from operations increased 10.2% to Rs 4,393 crore, Ebitda rose 14.1% to Rs 1,165 crore, and Profit After Tax (PAT) surged 19.9% to Rs 1,101 crores.
Eicher Motors reported a 3% beat on consensus Ebitda due to higher average selling prices (up about 4% Q-o-Q on better mix).
Royal Enfield has planned several product updates and increased marketing efforts, particularly for the Hunter model, to stimulate growth.
Middleweight Segment Growth: The company anticipates high single-digit growth in the middleweight segment, which represents its core market, in FY25.
Royal Enfield plans to launch more products like the Guerrilla 450, Classic Bobber 350, and Interceptor Bear 650 to drive customer aspiration and differentiation.
Nuvama: Maintain a 'Hold' rating with a target price of Rs 4,600.
Maintain a 'Sell' rating with an unchanged target price of Rs 3,750.
Recommend a 'Sell' with a target price of Rs 3,920.
Eicher Motors stock has fallen 3.3% in the past month and remained flat in the past three months. However, it was trading 3.84% higher at Rs 4,754.65 per share at 9:44 AM.