Shares of Eicher Motors Ltd. declined after at least four research firms downgraded the stock citing expensive valuations.
The owner of Royal Enfield Motorcycles has been consistently underperforming peers on both volume growth and margin since FY18, according to Macquarie Capital.
Macquarie expects the growth outperformance to continue to disappoint despite being an aspirational brand due to affordability issues. “ Yet, the stock is trading at a significant premium to two-wheeler peers, which is ‘unjustified’.”
That somewhat aligns with the views of Dolat Capital Market, IDBI Capital and ICICI Direct Research.
Eicher Motors’ net profit rose 7% year-on-year to Rs 533 crore in the quarter ended December, according to an exchange filing. Its revenue jumped 19% over the year earlier as sales recovered in the festive season. Operating margin, however, contracted to 24% from 25%.
Shares of Eicher Motors fell as much as 6.9%, before paring losses. The stock has gained nearly 50% in the last 12 months compared with a 26% rally in the S&P BSE Sensex.
Of the 45 analysts tracking the two-wheeler maker, 22 have a ‘buy’ rating, seven suggest a ‘hold’ and 16 recommend a ‘sell’, according to Bloomberg data. The stock is trading 2.4% below its 12-month consensus price target of Rs 2,755 apiece.