Eicher Motors share price declined nearly 4% after the automaker reported a 26% fall in its consolidated net profit for the quarter ended December 31, 2019.
Share price of Eicher Motors dropped 3.61% to the day's low of Rs 19,680 against the previous close of Rs 20,417.15 on BSE. Eicher Motors' share price trades higher than its 200-day moving average but lower than 5, 20, 50 and 100-day moving averages.
Net profit fell to Rs 913.52 crore during the quarter ended December 31, 2019 compared with Rs 1,241.85 crore profit in year-ago period.
Eicher Motors stock has lost 1.89% in one week, 4.39% in one month and 8.84% during last one year.
Revenue from operations rose 5.3% (YoY) to Rs 8,154.85 crore in the October-December quarter of the current fiscal as compared to Rs 7,740.19 crore in the same period of last fiscal.
The Royal Enfield-maker sold 1,89,143 motorcycles in the quarter, a decline of 2 per cent compared with 1,93,164 motorcycles sold over the same period in the fiscal.
"Eicher Motors' Q3FY20 consolidated EBITDA of Rs 900 crore (down 13% YoY) came 9% below estimates due to higher raw material costs, a trend contrary to other original equipment manufacturers as well and spike in other expenses. While domestic demand outlook remains subdued till H1FY21, traction on exports front and launch of the new platform remain key triggers, " said Edelweiss in its report.
Edelweiss in its report trimmed the FY20/21 estimate EPS 10/13% factoring the delay in new launches, weak demand environment and the spike in raw material prices and maintained a 'BUY' rating for the Eicher Motor share, revising its target price to Rs 23,417, from Rs 25,019 earlier.
The report further said, "The delay in upgrading its entire product portfolio to a new platform along with the BS-VI transition is likely to impact demand as well as margin in the near term. The ramp-up in exports (650cc twins and Himalayan Sleet) and sustenance of 650cc twins demand in the domestic market are crucial."
"At VE Commercial Vehicles (VECV) (a joint venture between Volvo Group and Eicher Motors Limited) as well, a series of new launches will help improve market share despite the ongoing slowdown, in our view," the report added.
In terms of domestic demand outlook, Edelweiss added, "Expect H1FY21 to be weak due to BSVI transition. However, expect a pick up in the next half. Overall, expect FY21 industry growth to be around 5-6%."
SBI Cap Securities in its report said," Eicher Motor's Q3 performance is largely in line with stabilising margin, post several quarters of decline, albeit supported by benign commodities".
The research house has upgraded the Eicher Motor stock to HOLD with a revised target price of Rs 18,540. The rating was largely driven by an increase in the target multiple to 20x FY22e PER from 15x (reflecting stabilizing franchise) but much lower than the 5-year average of 31x PER on muted earnings growth outlook (8% CAGR).
"Post significant stress on RE's franchise over the past couple of years, RE volumes are stabilizing with signs of bottoming out of premium motorcycle segment share, but we expect continued pressure on margin, dragging overall earnings growth recovery," the report further added.
JM Financial in its report maintained 'HOLD' with a revised March 2021 target price of Rs 18,500 (18x forward earnings) for Eicher Motor stock and said,"Limited impact from BS6 transition and significant pick-up in new models are the key risks. The company anticipates consumer sentiment to improve starting 2HFY21."
HDFC Securities maintained 'NEUTRAL' rating for Eicher Motor stock and said, "While RE volumes have stabilized over 3QFY20, the stock is trading at 29/26x on FY20/21 estimates. Going ahead, margins will be volatile due to the BS-VI transition. Also, competition is expected to increase over FY20-22, with new launches in the mid-size lifestyle segment from Jawa, Bajaj Triumph and Harley Davidson (in international markets)."