Eicher Motors Ltd

April 27, 2018 . Equities Desk

Eicher Motors Limited (EML) is the flagship company of the Eicher Group. It operates in two distinct business verticals – motorcycles and commercial vehicles. Eicher Motors owns the iconic Royal Enfield motorcycle business, which leads the premium motorcycle segment in India.

Outlook and Valuation: Given strong earnings growth potential in both RE & VECV businesses, we estimate consolidated PAT to grow at a robust CAGR of 23% over FY17-20E. The free cash flow generation of the company continues to remain strong despite significant capex. We expect RE’s premium valuation to sustain given its continued volume outperformance leading to market share gains. Further its industry leading margins and return ratios will also support higher valuation. The stock currently trades at 38x/32x/27x FY18E/19E/20E EPS. We recommend BUY rating on the stock with a SOTP based target price of Rs. 35,512, valuing RE/VECV at 33x/15x FY20E EPS.

Research Report – Eicher Motors Ltd

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