Prabhudas Lilladher has issued a BUY rating for Eicher Motors with a target price of Rs. 5,299, citing steady revenue growth, strong export demand, and expansion into new premium motorcycle segments. The company's recent launches and promotional efforts in India and international markets support volume growth and market presence. However, increased promotional and operational expenses have kept margins under pressure. Key growth drivers include new launches like the Classic 650, set for Indian retail in early 2025, and further expansion of the Royal Enfield (RE) brand in international markets. Investors are advised to monitor the stock’s support level at Rs. 4,599, with an upside target of Rs. 5,299.

Prabhudas Lilladher’s BUY Recommendation on Eicher Motors

Target Price Revised to Rs. 5,299 Prabhudas Lilladher reaffirms its **BUY** rating on Eicher Motors with a target price of Rs. 5,299, emphasizing the company’s expansion initiatives and steady volume growth, driven by new launches and intensified promotional efforts. Despite recent pressures on margins due to promotional and operational expenditures, Eicher’s strategies in both domestic and international markets solidify its growth potential in the premium motorcycle segment.

Revenue Growth Driven by Premium Model Mix

Higher Realization per Vehicle in 350cc+ Segment Eicher Motors reported a 3.6% YoY increase in consolidated revenue for Q2 FY25, supported by a strong sales mix favoring higher-capacity motorcycles. Standalone revenue grew by 7% YoY to Rs. 42.1 billion, while the average selling price per unit increased by 7.7% YoY, reaching Rs. 184,553. This growth was slightly below Prabhudas Lilladher’s estimate of Rs. 190,295 due to a minor variance in product mix within the 350cc segment, reflecting the company's premium positioning in the market.

Strong Export Outlook for Royal Enfield

International Expansion Supported by New Facilities Eicher Motors’ export volumes for Royal Enfield grew by 11% YoY, with international retail sales up by 12% YoY, driven by the success of recent launches in the 350cc+ category. In Q2 FY25, Eicher established a second Completely Knocked Down (CKD) facility in Brazil and a new CKD unit in Bangladesh, enhancing its distribution in North America and Latin America. With these developments, export volumes are projected to grow at a CAGR of 15.7% over FY24-27, further bolstered by continued brand investment and market expansion.

New Launches and Promotional Investments

Classic 650 Debuts in Global Markets; India Launch in January Eicher Motors introduced the Classic 650 in the UK, Europe, and the United States, with favorable responses from motorcycle enthusiasts. The India launch is scheduled for January 2025, aligning with anticipated demand in the wedding season. Eicher’s management is optimistic about sustaining market growth through aggressive promotional spending and a pipeline of new models, including two electric vehicles under the "Flying Flea" brand anticipated by H1 CY26.

Margin Impact from Increased Promotional and Warehousing Costs

Range-Bound Margins Despite Revenue Growth While revenue showed positive growth, Eicher’s Q2 FY25 EBITDA margin contracted by 91 basis points YoY to 25.5% due to heightened promotional activities and one-time warehousing expenses. The management has indicated that, although promotional spending will drive sales volumes, it may also limit margin expansion in the medium term. EBITDA rose only 0.7% YoY to Rs. 11 billion, narrowly meeting market expectations.

VECV Performance Contributes to Growth

Revenue and Realization Gains in Commercial Vehicles Segment Eicher Motors’ commercial vehicle segment, VECV, showed promising results with an 8.5% YoY increase in revenue to Rs. 54.4 billion, supported by a 6.3% rise in sales volume and higher penetration in the bus and export markets. The average selling price in VECV rose by 2.1% YoY, reaching Rs. 2.6 million. Although VECV’s EBITDA declined slightly by 2.2% YoY, its overall PAT grew by 12.4%, reinforcing its role as a growth driver within the company’s portfolio.

Financial Projections and Revised Targets

EPS and Revenue Growth Outlook Adjusted Prabhudas Lilladher has revised Eicher Motors’ EPS projections, estimating Rs. 189.0 for FY26 and Rs. 211.7 for FY27. Total revenue for FY25 is expected to reach Rs. 182.9 billion, marking a 10.6% increase YoY, while consolidated EBITDA margins are forecast to stabilize at approximately 26.2%. The core business is valued at 27.5x on projected EPS for September 2026, with the VECV division valued at 10x EV/EBITDA. This valuation underpins the revised target price of Rs. 5,299.

Technical Analysis and Stock Levels

Support and Resistance Markers for Eicher Motors The stock currently holds a support level at Rs. 4,599, and Prabhudas Lilladher has set a medium-term target at Rs. 5,299. Key resistance levels to watch include Rs. 5,416, with further potential gains contingent on successful launches and growth in the export and premium motorcycle segments. Investors should monitor the stock’s performance in response to quarterly earnings and international market expansion efforts.

Conclusion and Investment Outlook

BUY Recommendation for Long-Term Growth Potential Eicher Motors’ robust international growth strategy, product line expansion, and strong brand positioning in the premium motorcycle segment support Prabhudas Lilladher’s **BUY** call. With strategic investments in new markets and a focus on high-value models, the company is poised for long-term growth. Investors are advised to consider the Rs. 4,599 support level and Rs. 5,299 target for potential returns while remaining attentive to the potential impact of promotional expenses on margins.