The bulls have remained in control of Eicher Motors as the stock is up more than 10% in a week and over 25% over the past three months.
The recent rise in price has propelled the stock to a new record high of Rs 3,886 on November 1 but the rally may not be over yet.
Investors who missed the rally may buy the stock now or on dips for a possible target of Rs.4,232 in a year, which will surpass its current record high of Rs.3,886, experts suggest.
Fundamental radar: Eicher Motors likely to hit new record highs next year, says Anmol Das
“With the external macro environment currently supporting Indian equity markets, we see upside potential for Eicher Motors of 14% with a price target of Rs 4,232 over one year,” said Anmol Das, Head of Research at Teji Mandi.
“With motorcycles sold expected to be around 7.75 lakh for FY23 and margins continuing to rise as commodity prices average lower than last year, Eicher Motors share price may rise above Rs 4,232”, Anmol Das, Head of Research, Teji Mandi said. This lists five reasons Eicher Motors is a top buy:
1) Increase in demand
Motors has already sold 4,77,204 bikes (increase of 63.9% over YTD FY22) by the end of October 2022 (in just 7 months), representing +79% of bikes sold in all of last year. The company can close the financial year with more than 7.75 lakh motorcycles, ie around 30% growth in sales.
On average the company has sold around 68,000 bikes over the last seven months of FY23 and even if we are conservative we expect another 3 lakh (base case) bikes to be sold in the remaining five months.
2) price increases
With the introduction of numerous new variants, the average sales per motorcycle sold will increase in addition to the price increases of the last few quarters. We believe net sales per motorcycle sold will increase by 4-5% this year.
3) Fall in commodity prices
Just as the prices of the most important raw materials have been corrected by 15-20% compared to the average prices in the last year, e.g. For FY23, the company will see an improvement in margins of more than 200 basis points.
Any further deterioration, or even if commodity prices stabilize at current levels, could expand EBITDA and PAT margins to around 25% and 20%, respectively.
4) commercial vehicle
On the front line of the VE Commercial Vehicles joint venture we are seeing revenues of between Rs 500-600 crore for the current financial year generating profits in excess of Rs 100 crore for Eicher Motors shareholders.
In our baseline scenario for FY23E, assuming Dussehra and Diwali festival sales will ease off slightly over the next month or so, Eicher can achieve Rs 94 EPS by selling 60,000 two-wheelers per month in the remaining five months of FY23 sold. priced at 45 times earnings gives a price target of Rs 4,232.
Eicher Motors will also benefit from the slowdown in commodity prices in the last quarter or so, where the company will see margins up about 200 basis points at current commodity prices, even on lower sales volumes.
With the external macro environment currently supporting Indian equity markets, we see upside potential for Eicher Motors of 12% with a price target of Rs 4,232 within a year from the current price of Rs 3,755.
(Disclaimer: Experts’ recommendations, suggestions, views and opinions are their own. These do not represent the views of Economic Times)
https://economictimes.indiatimes.com/markets/stocks/news/fundamental-radar-5-reasons-why-eicher-motors-could-hit-fresh-record-highs-in-next-1-year/articleshow/95420283.cms eicher motors share price: Fundamental Radar: 5 reasons why Eicher Motors could hit fresh record highs in next 1 year