Eicher Motors slips 11% in three sessions as competition intensifies

Eicher Motors’ stock price slipped nearly 3% on Thursday, and nearly 11% in three trading sessions, amid a significant increase in competition. Share prices of Bajaj Auto and Hero MotoCorp, meanwhile, hit their 52-week high of Rs 4,936.70 and Rs 3,206.15, respectively, on BSE.

On Wednesday, Bajaj Auto and Triumph Motorcycles rolled out Triumph Speed 400 with a price tag of Rs 2.23 lakh. This followed Hero MotoCorp and Harley Davidson’s launch of the X440 on Monday. Priced at Rs 2.29 lakh, the X440 is the first among a series slated to be launched in the middle weight (250cc and 800cc) segment.

New entrants in the market could erode some of the monopoly of Eicher Motors’ Royal Enfield, which holds a 90% share in the 350cc segment.

HDFC Securities has downgraded Eicher Motors from ‘add’ to ‘reduce’ rating, and reduced its target price to Rs 3,086 per share from Rs 3,715. The brokerage said significant increase in competitive intensity has changed the business dynamics unfavourably Royal Enfield.

“While HD440X pricing took us by surprise, that of the Triumph 400cc came in as a bigger surprise, given that it comes with superior features like a liquid-cooled engine, upside-down forks, ride-by-wire, torque assist clutch, etc. We believe both these prices are likely to be introductory as both these brands try to gain a foothold in the cruiser market in India, which is currently dominated by RE (Royal Enfield)”, said the report.

HDFC Securities has lowered its earnings estimates by 16-18% over FY24-25E and expects Royal Enfield to be in a much better position to fight back once the competitive pricing stabilises. However, the brokerage firm underscored that if these competitive price points sustain for longer than expected, there would be further downside risks to its estimates.

According to Ruchit Jain of 5paisa.com, Eicher’s Royal Enfield enjoys a monopoly in the market. With these new entrants, there’s uncertainty among market participants whether Eicher will continue to command premium valuation.

He added that selling volume of Eicher’s stock in the cash segment is significantly higher than the regular sessions, indicating its underperformance. “Eicher Motors is likely to remain under pressure in near term and the support range lies between 3,000 and 3,100,” he said.

Bajaj Auto, meanwhile, has and ‘overweight’ rating from Morgan Stanley, while CLSA maintained an ‘outperform’ rating for the automaker. Jefferies gave a ‘buy’ rating, stating that with the launch of the attractively priced Triumph, it expects Bajaj Auto’s volume & EPS to grow at a 15% & 23% CAGR, respectively, over FY23-25E.

Share prices of Bajaj Auto and Hero MotoCorp closed up 0.59% and 0.47%, respectively, on Thursday. Eicher Motors closed at Rs 3,222.60, down 2.63%.