India’s Eicher Motors was on course for its best day since mid-2020, after the Royal Enfield motorcycle maker posted a quarterly profit beat, which analysts said indicated that the “toughest phase” of competition was over.
Eicher’s stock rose more than 8.3% and was the top gainer on the Nifty auto index, which was up about 1%.
Jefferies said that the “toughest phase of the competition is behind” for Royal Enfield. Emkay, which also said competition was “largely behind”, upgraded the stock three notches to “buy” from “sell”.
Demand for its motorcycles has sustained even after the October-November festive season due to successful launches of some of new premium models, Royal Enfield CEO B Govindarajan told analysts on Wednesday.
The company, which gets most of its earnings from Royal Enfield, came under pressure last year after two-wheeler makers Hero MotoCorp and Bajaj Auto launched premium Harley Davidson and Triumph models, directly challenging some of Royal Enfield’s top sellers.
Govindarajan added that rural demand was rising and continued to outpace urban sales growth. Rural sales account for a third of Royal Enfield’s sales and over half of the country’s two-wheeler industry.
The positive commentary sent Hero’s shares 1.5% higher. The company, which sells a major chunk of its motorcycles in rural India, is often viewed by investors as a gauge for rural sales.
It is due to report results later in the day.
Shares of other two-wheeler makers also traded marginally higher, with TVS Motor Company rising 0.6% and Bajaj Auto up 0.1%.
Additionally, analysts raised Royal Enfield’s volume growth estimates after Govindarajan said the company was focusing on volumes over margins and looking at “all the levers which are available for getting the growth.”
Nomura termed Royal Enfield’s focus on volume growth “a better trade-off” while upgrading the stock to “neutral” from “sell”. It raised its fiscal 2025 volume growth target to 8.3% from 5%, while Ambit raised its estimate to 5.4% from 3.9%.