Eicher Motors falls after Morgan Stanley downgrades stock citing margin, market share challenges

Shares of Eicher Motors Limited slipped over 2 percent to Rs 3,741 in early trade on January 16 after global brokerage firm Morgan Stanley downgraded the stock to underweight from equal-weight and cut the target price, citing market share and margin challenges, and high valuations.

Morgan Stanely has now assigned a target price of Rs 3,209 on Eicher Motors stock, implying a downside of 16.1 percent from the previous close of Rs 3,826.

At 9:20 am, Eicher Motors stock was trading at Rs 3,770, down 1.6 percent from the previous close. In the last year, the stock has gained over 21 percent, slower than the Nifty, which has claimed over 23 percent during the same period.

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Morgan Stanley analysts highlighted growth and market share challenges, limited margin upside and high valuations as the key reasons for the downgrade.

Also read: Analyst Call Tracker | Why Tata Motors dazzled in 2023 but Eicher dimmed out?

Eicher’s Royal Enfield has stiff competition in the market. Not Just Bajaj Auto or Harley Davidson, Hero Motocorp’s recent entry in the 440cc segment with the newly launched Maverick will also pose challenges.

Read more: Eicher faces a Himalayan challenge in H2; Hero MotoCorp, Bajaj Auto set to zip fast

“While RE (Royal Enfield) has faced competition in the past also, this time it is different as the competition is coming from (1) global iconic brands and (2) The products would be supported by experienced and established mass market players which have both financial and distribution muscles,” analysts at Dolat Capital said in an earlier report. “In our view, RE would need to revisit its product and pricing strategy as prospective RE customers are likely to consider other major brands as potential alternatives.”

Nomura Financial Advisory and Securities predicts Royal Enfield’s market share will decline to 82 percent from 90 percent in the coming quarters.

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