1:10 Split Stock: Eicher’s Rs 1 Lakh Becomes Rs 18 Cr in 15 Years; Share Soars 18,545%, Purchase For Rs 4,661 TP

One of the numerous benefits of a stock split is that it draws bulls and lowers the price of a share while simultaneously increasing demand. The stock split charm is very effective, particularly for Royal Enfield manufacturer Eicher Motors. If you had made a long-term investment in this auto player, you probably would have been a crorepati by now. Eicher serves as an illustration of why, over the long term, equity shares provide the best returns when compared to other conventional schemes.

because in only 15 years, Eicher’s stake has increased by an astounding 18,545.37%. The stock started its journey on February 25, 2009, at less than Rs 22.

With a market valuation of Rs 1,07,481.03 crore, Eicher’s shares closed last Friday at Rs 3,925.45 each, down 0.70% from the previous week. The stock is just a few hundred short of reaching Rs 4,201.70 a share, its 52-week high.

Eicher Motors Stock Split Charm: The company launched its first stock split four years ago. One existing equity share of the corporation was divided into 10 shares. Eicher’s face value of Rs 10 was reduced to Rs 1 on August 24, 2020, when it became ex-split. Since then, Eicher has been trading on the corrected stock split, which resulted in an increase in the number of shares.

Investors who invested Rs 1 lakh in Eicher Motors 15 years ago are now crorepati due to a stock split.

For example, if an investor purchased Eicher shares fifteen years before, one lakh rupees will purchase 4,697.04 equity shares at the February 25, 2009, price of Rs 21.29 a share. On August 24, 2020, assuming the investor had not made any changes to their portfolio. 4,697.04 will split into 46,970.4 equity shares (4,697.04 x 10) as a result of a 1:10 stock split ratio.

Furthermore, assuming the investor has held onto its 46,970.4 equity shares up to this point, the value of their holdings is an astounding Rs 18.438 crore (46,970.4 X Es 3925.45 share price as of February 23, 2024).

There are yet more benefits to come!
Price Target for Eicher Motors:
At Rs. 4,179 crores, up 12% from Rs. 3,721 crores in the equivalent quarter of FY 2022–2023 and Rs. 1,090 crores, up 27% from Rs. 857 crores in the same quarter of the previous fiscal year, Eicher posted its highest-ever revenue from operations during Q3FY24. The company’s profit after tax was reported at Rs. 996 crores, a significant increase of 34% over the same time the previous year when it was reported at Rs. 741 crores. Compared to 219,898 bikes sold during the same time in FY 2022–2023—a 4% increase—Royal Enfield sold 229,214 motorcycles during the quarter.

“Eicher Motors revenue from operations grew by 12.3% YoY/1.6% QoQ to Rs 4,179 Cr, led by price hikes and premiumization trend amid subdued volume growth of 3.8% YoY to 248,779 units,” said Religare Broking in a research note on Eicher’s performance. Its profit improved by 34.4% YoY to Rs 996 Cr, although it fell by 2% sequentially. Its other income increased by 31.9% YoY, and its share of JV profits increased by 78.2% YoY.”

Additionally, according to Religare Broking, 1) Volvo and Eicher’s combined parts business sales increased by 22.3% YoY to Rs 560 Cr. 2) Customers are responding well to the recent debuts of the Himalayan 450 and Shotgun 650, as shown by the robust number of reservations. 3) Since its inception in 2022, RE Hunter has consistently generated ~265k in volume. 4) The management anticipates that the next two to three quarters will see further pressure on the export market. 5) The market shares for heavy-duty trucks and light-medium-duty trucks were 9.6% and 34.5%, respectively. 6) Sales of VE powertrains increased 8% year over year to 13,596 units. 7) The business plans to introduce the new “Sherpa Engine” to the global market, which will help with volume growth. 8) The following quarters’ fresh launches may maintain a similar range of overhead costs.

The brokerage said, “EML continues to lead the 300+cc segment and has been posting volume growth consistently, even in the face of recent competitive pressure.” The firm is anticipated to benefit from new releases in the approaching quarters and improved purchasing attitudes in the 125cc+ category with regard to volume growth. Additionally, the increase in private capital and government spending on bus electrification will help the joint venture’s VECV’s volume and revenue growth. With this in mind, we project that its sales, EBITDA, and PAT would increase at a CAGR of 16.3%, 19.9%, and 22.1% between FY23 and FY26E. We continue to retain our Buy rating and have raised our target price to Rs 4,661, which values the company at a PE of 24 times its FY26E EPS.

Sharekhan also said in its note, “Management has indicated for an enhanced traction in inquiries and bookings after reporting in-line performance with projected operational performance. Since launching the Shotgun 650 and Himalaya 450cc in the home market lately, RE plans to keep adding new items to expand its line-up. Additionally, the market has reacted well to its most recent release, the Himalayan 450, as it presents a compelling upgrade option for its current 350cc motorbike buyers. VECV unveiled its electric SCV recently, and they want to start shipping them by Q1CY2025. The management is hopeful about the performance of the premium motorcycle category in the local market and is looking forward to long-term, healthy development in the CV industry.”

Sharekhan said, “A rise in competition is the cause of concern as growth in the premium market is expected to be distributed among new players,” even though RE is anticipated to continue to be a major beneficiary of the expanding premiumization trend in the domestic motorbike industry. The market would grow as a result of the additional competition in the premium class, but because of its high base, RE may lose some market share. We maintain our Buy recommendation on the stock with an unchanged price target (PT) of Rs. 4,331 due to the company’s emphasis on balanced growth, growing premiumization, and leadership in the premium motorbike market.”

With the exception of one stock split, Eicher has continuously paid investors dividends. The firm has paid out up to 23 dividends since June 2001. Among the dividend king stocks is Eicher. Eicher hasn’t given out any incentives, however.

The parent company of Royal Enfield, a leader in the middleweight motorbike market (250cc – 750cc), is listed on Eicher Motors. Since 1901, Royal Enfield, the world’s oldest motorcycle manufacturer still in continuous production, has been producing its unique bikes. With the goal of reviving easy, entertaining, and affordable motorcycling, Royal Enfield is a global company that operates in India as well as more than 60 other countries.

Royal Enfield manufactures bikes for the global market in Tamil Nadu, India, using state-of-the-art development facilities in Chennai, India, and Leicestershire, UK. VE Commercial Vehicles Limited (VECV) is a joint venture between EML and the Volvo Group of Sweden, in addition to motorbikes. Established in July 2008, the firm offers the whole line of trucks and buses bearing the Eicher brand, handles the sole distribution of Volvo vehicles in India, produces and exports engines for the Volvo Group, non-automotive engines, and operates an Eicher component business.