Sharekhan has given Buy recommendation for Eicher Motors with a target price of Rs. 4100 in its research report issued on Sep 01, 2022
Sharekhan’s research report on Eicher Motors
Promising launch of Hunter 350, focus on core brands through refreshed launches, better customisation, robust export opportunities and expected recovery in premiumisation trend in two-wheeler industry would widen the company’s addressable market and boost performance going forward. EML would also benefit from a multi-year upcycle in the CV industry by targeting niche markets, strong product portfolio and increasing role of digitalization and technology for fleet owners. Earnings would clock a robust 48.3% CAGR over FY22-24E, driven by a 28.7% domestic revenue CAGR, 32% export revenue CAGR and a 410 bps rise in EBITDA margin from 21.1% in FY2022 to 25.2% in FY2024E. Valuation is yet to catch up with the expected recovery in performance, as stock trades at a 20-25% discount to its historical average multiples, at a P/E of 26.4x and EV/EBITDA of 22.7x on its FY2024E estimates.
Outlook
We initiate coverage on Eicher Motors Limited (EML) with a Buy rating and a 12-month PT of Rs. 4,100 by valuing the business at 28x its rolling-forward September 2024E EPS.