Securities house CLSA is upbeat on Eicher Motors Ltd, which makes hot-selling Royal Enfield motorcycles. “Order inflow remains above production and is growing at 15 per cent year-on-year on same-store sales growth basis. This is despite multiple disruptions such as demonetisation and transition to GST in the last one year,” it said in a report.
The iconic brand’s production capacity will rise 40 per cent over 2017-19, and earnings are likely to grow at a compounded annual growth rate (CAGR) of 29 per cent over the next three years, the brokerage said, adding the company is rapidly expanding its dealer network to meet robust demand.
After CLSA set a price target of Rs39,300, the stock jumped to Rs33,483.95 on Friday before profit-taking pulled it down to Rs32,628.70 by close. Still, the share is up nearly 50 per cent so far this year, more than double the 19 per cent rise in the benchmark auto index.
“The stock is trading at 35 times one-year forward PE (price-to-equity) but its premium valuations should sustain given strong growth outlook and low competitive threat for Royal Enfield,” the brokerage said.
Eicher also makes trucks and buses in a joint venture with Sweden’s Volvo group