Eicher Motors shares with 22% in a month. Will GST-guided premiumization rise further upside down?

After being 22% risen in the past month, Eicher Motors, the maker of Royal Enfield, was able to collect himself further, said Bank of America Securities. While retaining his purchase call on the shares, the broker has increased the target price to RS 7,500 (from RS 6,300), which implies an upward potential of almost 10%. The stock finished more than 1% higher in RS 6,893.

What works for Eicher? According to the international brokerage, a large number of factors. The channel controls show that large eastern states such as Bihar, West Bengalen and Uttar Pradesh-Die together remain a third of the volumes of the industry good-underharding, with household two-wheelers owned by only 30%.

Nevertheless, Royal Enfield has booked competitive market share profits in these regions, as a result of its aspirational brand stretch, targeted product interventions and improving financing options in rural bags.

In another cluster of states – Haryana, Madhya Pradesh and Rajasthan – which are good for about 20% of the volumes, penetration levels are already higher than 60%. Here the demand for premium bicycles is shifting.

TVs and Eicher have been important beneficiaries, with Bofa emphasizing that “buying extra question” stimulates growth. Eicher in particular has become more accessible to new buyers thanks to the GST Rejig, which strengthens the business as a market share market.

According to Bofa, the GST rate reduction is a game change for premium manufacturers. For Eicher, it has lowered the effective price of his flagship classic and bullet models to under RS ​​2 Lakh. This price that Sweet Spot can unlock the demand for upgrade of the 150-20ccc segment, where ambitious buyers have Royal Enfield with long eyes but were stopped by affordability. The brokerage notes that even modest price interventions in the past have stimulated the volumes, making GST a clear catalyst for further expansion.

Instead, it claims that the GST section resolves the debate “margin versus growth”, giving the company the main space to pursue expansion without pressing profitability – a strategy that it has long followed. Product launches prepared for next year can add a low momentum, experts say.

“Eicher is our preferred choice in two-wheelers,” Bofa wrote, adding that although all OEMs benefit from the GST-Snit, the superior franchise strength of TVs and Eicher justifies their richly valuation multiples. With growth levers again in the game, supporting macros and policy wind, the brokerage expects Eicher to remain an important beneficiary of the current two-wheeler-up cycle.

(Disclaimer: recommendations, suggestions, views and opinions of the experts are their own. These do not represent the views of economic times)