Eicher Motors share price jumped by 3 percent on Friday as the stock looks fundamentally strong. The stock has been suggested as BUY Call by researchers from UBS with target price revision from Rs 4300 to Rs 5000. Eicher Motors opened the trading session at Rs 4613 and touched intraday high of Rs 4799. The stock ended the session at Rs 4761, gaining nearly 3 percent.

During the week, automobile companies witnessed higher volatility as Bajaj Auto announced quarterly results. Bajaj Auto results disappointed the markets and majority of stocks in the sector witnessed decline. However, there was recovery on Thursday and Friday.

UBS has upgraded Eicher Motors, raising its price target to ₹5,000 from ₹4,300, indicating a potential upside of 34% from its last closing price. The upgrade reflects UBS's confidence in Eicher Motors' risk-reward profile, especially given Royal Enfield's insulation from electrification risks. UBS anticipates strong domestic and international growth for the brand, projecting a 10% CAGR in domestic sales for Royal Enfield from FY 2024 to FY 2026, outpacing industry growth. Moreover, UBS forecasts Eicher Motors' EBITDA to grow at an 18% CAGR, driven by strong demand and favorable export conditions.

UBS Elevates Price Target for Eicher Motors

Price Target Raised by 34%
UBS has increased its price target for Eicher Motors from ₹4,300 to ₹5,000, signaling a 34% potential upside based on the company’s latest closing price. This substantial revision reflects UBS's renewed confidence in the company’s financial outlook and future growth trajectory.

Inclusion in APAC Key Call List
Eicher Motors has also been added to UBS's prestigious "APAC Key Call" list, which highlights top investment picks across the Asia-Pacific region. This inclusion further underscores UBS's strong conviction in the company’s prospects, particularly in the face of macroeconomic challenges.

Compelling Risk-Reward Dynamics Identified

Insulation from Electrification Risks
UBS's upgrade is largely influenced by its assessment of Eicher Motors' robust risk-reward profile. Royal Enfield, a subsidiary of Eicher Motors, stands out by being relatively immune to the risks associated with the ongoing electrification trends in the automotive sector. This insulation offers a competitive edge, positioning the company for sustainable growth.

Royal Enfield's Growth Prospects Bolstered

Launch of the 450cc Platform
UBS is particularly optimistic about the launch of Royal Enfield's 450cc platform, which is expected to address concerns around competition and stimulate growth. This product development is a key driver for the company's upward trajectory in the domestic market, helping it maintain a lead in the premium motorcycle segment.

Projected Volume Growth Outpaces Industry
UBS forecasts that Royal Enfield is poised for domestic volume growth at a CAGR of 10% between FY 2024 and FY 2026. This figure surpasses the broader industry’s expected growth rate of 6% to 7%, reflecting the company’s strong market positioning and strategic initiatives.

EBITDA Growth Projections at 18% CAGR

EBITDA Growth Potential
UBS projects Eicher Motors’ EBITDA to expand at an impressive CAGR of 18% over the same period, underscoring the company’s ability to capitalize on both domestic demand and international expansion. This robust financial outlook suggests that the company is well-positioned to enhance profitability in the medium term.

Strong Domestic and Export Demand

Domestic Demand as a Key Growth Driver
UBS’s outlook is buoyed by the strength of domestic demand for Royal Enfield motorcycles, which continues to show resilience despite macroeconomic headwinds. This demand is expected to fuel the company’s overall revenue and profitability growth.

Favorable Export Conditions
Additionally, favorable export conditions are expected to support Eicher Motors' international sales, providing a dual revenue stream that enhances the company’s growth prospects. UBS remains optimistic about the company’s ability to tap into new markets and expand its global footprint.