On Friday, JPMorgan (NYSE:JPM) adjusted its outlook on Eicher Motors (EIM:IN) shares, increasing the price target to EUR 4,510 from EUR 4,435, while retaining a Neutral stance on the stock.
The revision reflects a modest increase in the firm's earnings per share (EPS) estimates for the fiscal years 2025 to 2027. This change is attributed to anticipated higher margins, a common trend across the industry, and some expected benefits from the company's recently updated motorcycle models.
The analyst's cautious perspective on Eicher Motors is influenced by two primary factors. Firstly, there is an expectation of a slower growth rate in the high-end motorcycle segment, which Eicher targets, compared to the overall industry growth.
Secondly, the potential for Eicher to lose market share is heightened due to intensified competition from other major players like Bajaj, Hero, and Honda (NYSE:HMC), particularly in the ultra-premium motorcycle niche that Eicher has traditionally dominated.
Despite the slight EPS revision, JPMorgan anticipates that Eicher Motors may face a devaluation due to its projected domestic volume growth. The company's growth is estimated at a compound annual growth rate (CAGR) of 6.5% from fiscal year 2024 to 2027, which is expected to lag behind the overall two-wheeler (2W) industry growth projected at 8% CAGR during the same period.
The new price target of EUR 4,510 takes into account these updated earnings estimates and the industry-wide margin improvements, alongside the potential positive impact of Eicher's refreshed motorcycle lineup.
However, the Neutral rating suggests that the firm maintains a balanced view on the stock, acknowledging the company's strengths while also recognizing the challenges it faces in the competitive landscape.
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