Why Morgan Stanley has downgraded Eicher Motors's share
Eicher Motors's stock took a hit today with shares dropping over 2% to Rs. 3,741 in early trading. This came after global brokerage firm Morgan Stanley downgraded the stock to underweight from equal-weight and lowered the target price. The downgrade was due to market share and margin challenges, as well as high valuations. Morgan Stanley's new target price for Eicher Motors is Rs. 3,209, indicating a 16.1% decline from the previous close of Rs. 3,826.
Eicher's Royal Enfield facing stiff competition in two-wheelers market
Morgan Stanley analysts pointed toward growth and market share challenges, limited margin upside, and high valuations as the main reasons for the downgrade. Eicher's Royal Enfield (RE) faces competition from Bajaj Auto, Harley Davidson, and Hero MotoCorp's recent entry into the 440cc segment with the newly launched Maverick. Meanwhile, Dolat Capital analysts said, "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."
Predictions for Royal Enfield's market share
Nomura Financial Advisory and Securities predicts that Royal Enfield's market share will drop from 90% to 82% in upcoming quarters. The report highlights that this time, the competition is different as it comes from global iconic brands and products backed by experienced mass-market players with financial and distribution power.
