Eicher Motors shares jump 6% on UBS upgrade
Eicher Motors jumped 6% on Wednesday to hit the day's high of Rs 3,940 after UBS upgraded the stock to 'Buy' from an earlier 'Neutral' rating while raising its price target to Rs 5,000 from Rs 4,300.
With today's gains, the rally has extended to two sessions in a row. Over 13 lakh shares were trading on the NSE around 10:15 am with the traded value standing at Rs 531.50 crore. It was also the top Nifty gainer around this time.
The Zurich headquartered brokerage in a review note said that it expects Royal Enfield's upcoming 450cc platform launch to address competition and growth concerns. In its view, the company is found wanting on multiple fronts including its strength in RE's addressable market, lackluster response to competition and company's strong customer connect.
UBS sees the start of a multi-year upgrade cycle among the existing customers while expecting a 10% domestic volume CAGR in FY24-26 for RE versus the industry's 6-7%.
The stock is trading at a 20% discount to Bajaj Auto's 1-year forward PE, it noted, calling the current risk-reward compelling, especially since RE remains insulated from electrification risk, UBS said.
Eicher has delivered returns of 31% over the past 12 months which is an underperformance over Nifty Auto which has given superior returns of 68% during this time. The broader Nifty has given returns of 29%.
Royal Enfield motorcycle manufacturer, Eicher Motors had reported a strong 34.4% year-on-year (YoY) growth in consolidated net profit for the quarter ended December to Rs 996
