Eicher Motors Accelerates with Stellar Q3 Performance, Stock Hits 52-Week High
The stock of Eicher Motors Ltd surged approximately 7% on Wednesday, reaching a new 52-week peak of ₹7,805, following the announcement of its impressive December quarter (Q3FY26) financial results. This rally reflects strong investor confidence in the company's robust operational metrics and future growth trajectory.
Financial Highlights Showcase Strong Growth and Margin Expansion
Consolidated EBITDA for Eicher Motors rose by 30% year-on-year to ₹1,556.7 crore, supported by a 21% increase in bike volumes under the iconic Royal Enfield brand. The volume growth was primarily fueled by the domestic market, which expanded by 24%, benefiting from a goods and services tax rate reduction implemented in September. Consolidated revenue saw a significant 23% improvement, reaching ₹6,114 crore.
Notably, the consolidated EBITDA margin improved by 130 basis points year-on-year to a six-quarter high of 25.5%. This margin expansion was achieved despite the company's strategic focus on growth over profitability, driven largely by reductions in other expenses. For the nine-month period of FY26, volumes have risen by 27%, and the full fiscal year is expected to significantly outpace FY25's growth rate of 10%.
Royal Enfield's Market Leadership and Competitive Resilience
While bikes with engine capacities exceeding 350cc initially experienced a dip due to a GST hike, demand in these premium segments is now recovering, as confirmed by the management. For FY27, Eicher Motors has projected an industry growth rate in the high single digits, with Royal Enfield anticipated to outperform the broader market.
A Jefferies India report dated February 10 highlighted that Royal Enfield faced new competition in 2023 from launches by Hero-Harley and Bajaj-Triumph. However, these competing models have been selling only 1,000 to 6,000 units per month recently, compared to Royal Enfield's average of 92,000 units per month over the first ten months of FY26. According to Jefferies, the toughest phase of competition and margin concerns for Royal Enfield is now behind it.
Expansion Plans and Cost Management Strategies
With plants operating near full capacity utilization and sustained demand, Eicher Motors is expanding its manufacturing capacity at the Cheyyar facility in Chennai. This expansion will increase total annual capacity to 2 million vehicles, a nearly 35% rise, to be completed in phases by FY28.
The company is experiencing some pressure on raw material costs, particularly due to precious metals, but price hikes implemented in April and July have helped offset this impact. An additional price increase for select models in January is expected to marginally improve margins in the fourth quarter. Furthermore, Eicher has decided to hedge its exposure to precious metals to mitigate the effects of price volatility.
Strong Performance Across Segments and Valuation Insights
Beyond motorcycles, Eicher's joint venture with AB Volvo for trucks and buses, Volvo Eicher Commercial Vehicles (VECV), also recorded robust performance with a 24% volume growth in Q3, reaching 26,086 units. For Royal Enfield bikes, the average realization saw a marginal increase of 0.8% year-on-year to approximately ₹1.82 lakh per vehicle, while EBITDA per vehicle rose by 7% to ₹48,300.
The stock has rallied nearly 56% over the past year, rewarded for strong volume performance. It is currently trading at 33.4 times the estimated earnings per share for FY27, slightly above its long-term average of 31 times, as per Bloomberg data. While Eicher Motors is well-positioned to benefit from rising two-wheeler demand and the trend toward premiumization, consistent volume growth will be crucial to justify its current valuation levels.
