Eicher Motors' Strategy Pivot Boosts Stock As Analysts Raise Target Price

Eicher Motors Ltd.'s new strategy to focus on sales growth rather than margins has enthused Dalal Street with the stock rising as much as 8.37% in trade on Thursday. The counter rallied in a falling market even as the Royal Enfield maker's post muted second quarter results.

In its post earnings call, the management mentioned it was shifting focus to higher sales growth. This is a key pivot from its preference towards Ebitda margins.

The management also highlighted higher sales growth in festive period and better rural performance aided by reintroduction of key products. Brokerages are cautiously optimistic on the stock, noting the glaring uptick in marketing spend and potential near-term pressures on Ebitda margins. 

The company has clearly flipped the tables in terms of strategy. According to Emkay, its renewed ‘growth focus over margins’ is positive. It upgraded the company to a 'buy' from 'sell' rating earlier.

Nomura also upgraded the company to a ‘neutral’ from ‘reduce’ rating earlier, with target price of Rs 4,391 from Rs 4,102 earlier.

‘’Growth over margins is the right strategy in the long run," Morgan Stanley said. Although it has an 'underperform' rating, that’s purely in terms of valuation pricing in margin expansion, which looks stretched.

While this might put some pressure on margins in near term, the absolute Ebitda will grow in line with sales. Last 12 months has been flat in terms of sales growth and a definite pivot in terms of strategy for aiding sales growth will be key.

October has been the first month of strong sales. It crossed the Rs 1 lakh sales mark in a month for the first time led by strong festive demand. This has also led to inventory corrections which is a positive as well. Current inventory is at two-three weeks and replenishment of this will also lead to higher sales growth in November and December.

One month post Diwali, generally automakers report lower sales as most purchases are planned around the auspicious festive period. But with inventory at lower levels than usual for the Royal Enfield maker, outlook looks positive for the company.

Industry festive retails were up 6-7% YoY, while Royal Enfield's was up 26%.

The company also highlighted that certain markets where the traditional ‘Bullet’ and ‘Classic’ are preferred—like Punjab, UP, Maharashtra and Karnataka—saw sales rebound led by reintroduction of ‘Bullet 350 Battalion Black’. This has been a good introduction to gain market share and increase sales.

Emkay upgraded the company to a 'buy' from 'sell' rating earlier, with target price of Rs 5,300 from Rs 3,750 earlier. This indicates an upside of 16% from previous close. The new strategy is positive and product intervention such as relaunch of Bullet Battalion Black edition with retro looks aided sales. Apart from product launches, improved supplies, and higher marketing activities aided the strong festive sales. The brokrage has raised its FY26/27 consolidated earnings estimates by 10% each.

Nuvama also upgraded the stock to a ‘buy’ from ‘hold’ rating earlier, with target price raised to Rs 5,500 per share from Rs 4,500 earlier. With new launches and new strategy, the brokerage expects strong recovery in sales with a 12% jump in sales, compared to last year between October-March 2025. It has increased its FY25–27 earnings forecast by up to 8%/6%.

Jefferies also highlighted that the toughest phase of competition is behind and that the stock is just 15% premium to average price to earnings ratio to both Bajaj Auto Ltd. and Hero MotoCorp Ltd. This used to be 60% premium in last eight years. The brokerage maintained their ‘buy’ rating with a target price of Rs 5,500.

The company has launched three to four key products like Classic 350 and Classic 650 as well. Eicher has also introduced the Bear 650.

At the start of the quarter, the company introduced the Guerilla 450-CC motorcycle. The 400-CC has seen multiple launches recently with Bajaj entering the space with Pulsar 400. They also have a partnership with Triumph and launched the Speed 400 and Scrambler as well. Harley Davidson also launched the 440x in partnership with Hero Motors to challenge the incumbent.