Eicher Motors shares jump 6% on UBS upgrade

The Zurich headquartered brokerage in a review note said that it expects Royal Enfield's upcoming 450cc platform launch to address competition and growth concerns. In its view, the company is found wanting on multiple fronts including its strength in RE's addressable market, lackluster response to competition and company's strong customer connect.

UBS sees the start of a multi-year upgrade cycle among the existing customers while expecting a 10% domestic volume CAGR in FY24-26 for RE versus the industry's 6-7%.

The stock is trading at a 20% discount to 's 1-year forward PE, it noted, calling the current risk-reward compelling, especially since RE remains insulated from electrification risk, UBS said.

Eicher has delivered returns of 31% over the past 12 months which is an underperformance over Nifty Auto which has given superior returns of 68% during this time. The broader Nifty has given returns of 29%.

Royal Enfield motorcycle manufacturer, Eicher Motors had reported a strong 34.4% year-on-year (YoY) growth in consolidated net profit for the quarter ended December to Rs 996 crore, and this was a tad higher than Street's estimates. Consolidated revenue from operations rose 12.3% YoY to Rs 4,179 crore, which too, was above the estimated Rs 4,048 crore. Sequentially, the topline rose just 1.6%, while the bottomline declined 2%.

Operating profit, calculated as earnings before interest, taxes, depreciation and amortisation (EBITDA), grew 27% on year to Rs 1,090.43 crore and was largely on expected lines. Operating margin expanded 305 basis points on year to 26.09%.

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