The near-term volume outlook remains weak given subdued auto demand. The global investment bank continues to believe in Royal Enfield product franchise
Eicher Motors tumbled after the Royal Enfield maker posted an in-line set of numbers amid concerns over volume growth due to subdued consumer sentiments. The share fell a little over 5 percent in morning trade on May 13.
Royal Enfield registered a significant volume decline of 14 percent year-on-year during the quarter. The volume growth was hit due to overall weakness and subdued customer sentiments in the auto sector.
The company sold 8,22,724 Royal Enfield units during 2018-19, a marginal growth over 8,20,121 units in 2017-18.
In terms of bottom line, Eicher Motors registered an 18.05 percent rise in consolidated net profit after tax to Rs 544.84 crore for March 2019 quarter. The company had reported a net profit after tax of Rs 461.53 crore in the year-ago period.
CLSA maintained its outperform rating on Eicher Motors post March quarter results but slashed its target price to Rs 22,500 from Rs 23,900 earlier.
The global investment bank slashed its FY21 EPS by 12-14 percent. Margin slipped 170 bps on a QoQ basis led by the full impact of anti-braking system (ABS) cost increase.
The near-term volume outlook remains weak given subdued auto demand. The global investment bank continues to believe in RE’s (Royal Enfield) product franchise.
RE has headroom for long-term growth, said the CLSA note but continued earnings cut is a drag on the stock, it said.
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