Shares of Eicher Motors rose 6 per cent in today’s early trading session, reaching Rs 3,940 apiece, following a rating upgrade by global brokerage firm UBS.
The global brokerage firm upgraded its rating to ‘buy’ with as much as 35 per cent upside, citing the company’s new launches, and lacklustre performance from peers. UBS analysts have raised their price target on Eicher Motors stock to Rs 5,000, implying an upside of 34.5 per cent from the last close.
The stock has also been included in UBS’ “APAC Key Call” list.
Eicher Motors has been upgraded by UBS as the brokerage finds its risk-reward to be “compelling”, particularly since Royal Enfield remains insulated from the electrification risk.
The brokerage believes that Royal Enfield’s upcoming 450 cc platform launch to address competition and growth concerns. “We think the market is missing continued strength in Royal Enfield’s addressable market, lackluster response to competition, Royal Enfield’s strong customer connect and the start of a multi-year upgrade cycle among existing customers.
Eicher Motors’ Royal Enfield is likely to see its domestic volumes grow at a compound annual Growth Rate (CAGR) of 10 per cent between the financial year 2024 – 2026, compared to the industry growth between 6 per cent to 7 per cent, according to UBS.
Shares of Eicher Motors are now trading at a 20 per cent discount to Bajaj Auto’s one-year forward price-to-earnings multiple compared to a 50 per cent premium over the last five years.
Currently, Eicher Motors is trading at a one-year forward price-to-earnings multiple of 23.11 times, compared to Bajaj Auto’s 28.64 times.
Eicher Motors’ Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) is likely to grow at an 18 per cent CAGR, as per UBS. The brokerage’s bullish stance is also driven by domestic demand and a continued favourable backdrop for exports.
Shares of Eicher Motors ended 0.8 per cent higher on Tuesday and have risen 27 per cent over the last 12 months.
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