UBS Upgrades Rating To “Buy” On Risk Reward; Check Target Price As Eicher Motors Soars 6%

Eicher Motors’ shares increased 6% during today’s early trading session to hit Rs 3,940 a share, as a result of a rating boost by international brokerage firm UBS.

The international brokerage firm cited the company’s recent launches and its rivals’ dismal performance in upgrading its recommendation to “buy” with up to 35% upside. The Eicher Motors stock price objective of Rs 5,000 has been increased by UBS analysts, indicating a 34.5% increase from the previous closing.

The stock is included on UBS’s “APAC Key Call” list as well.

UBS has upgraded Eicher Motors because it considers the company’s risk-reward to be “compelling,” especially given that Royal Enfield is not exposed to the electrification issue.

The brokerage thinks that Royal Enfield’s planned 450 cc platform introduction will help to allay worries about growth and competitiveness. “We believe that the market is missing out on Royal Enfield’s addressable market’s sustained strength, the company’s strong customer connection, a lackluster response to competition, and the beginning of an extended multi-year upgrade cycle among current customers.”

According to UBS, domestic volumes of Eicher Motors’ Royal Enfield are expected to rise at a compound annual growth rate (CAGR) of 10% during the financial years 2024 and 2026, compared to industry growth of 6% to 7%.

In contrast to the 50% premium over the previous five years, shares of Eicher Motors are now selling at a 20% discount to Bajaj Auto’s one-year price-to-earnings multiple.

The price-to-earnings ratio that Eicher Motors is now trading at is 23.11 times for the next year, while Bajaj Auto’s is 28.64 times.

According to UBS, Eicher Motors’ earnings before interest, tax, depreciation, and amortization (EBITDA) are projected to increase at a compound annual growth rate of 18%. The brokerage’s optimistic outlook is also influenced by strong domestic demand and an environment that is still favorable for exports.

Eicher Motors’ stock increased by 0.8% at the close on Tuesday, and it has increased by 27% in the last year.