Last Updated: July 06, 2023, 13:49 IST
Eicher Motors share price fell over 2.7 per cent on July 6, marking its third straight session of losses. At the time of writing this report, the stock was trading 2.70 per cent lower at Rs 3,220.50 on the BSE. It hit a low of Rs 3,207.55 during the trade.
In the last three days, the stock has slipped nearly 12 per cent (from July 3, 2023, closing to today’s low level on the BSE).
The market capitalization of the company has eroded by Rs 11,300 crore during this period as investors fear Hero MotoCorp and Bajaj Auto to eat into the company’s moat.
Over the past few days, the premium bike market has heated up with new launches threatening to eat into Royal Enfield’s 90 percent market share. On July 3, Hero and Harley launched the Harley Davidson X440 which comes with a 440cc engine. The bike’s starting price at Rs 2.29 lakh is at a 15 percent premium to the Royal Enfield’s Classic 350cc and Meteor 350cc.
Meanwhile, HDFC Securities has downgraded the stock to REDUCE from ADD with a target price of Rs 3,086 from Rs 3,310 earlier. The brokerage said that aggressive competition will hurt Eicher Motors’ flagship unit, Royal Enfield.
Over the last two days, both Harley Davidson (in partnership with Hero MotoCorp) and Triumph (in partnership with Bajaj Auto) have launched cruiser bikes at extremely competitive and similar price points, which are marginally higher than Royal Enfield’s best-selling Classic 350cc (Chrome), analysts at the brokerage note.
“What leaves us confused is the fact that while pricing is aggressive, both players seem to have very limited capacity to start with. We, therefore, believe that this is likely to be introductory pricing and unlikely to be sustainable in the long run for the features/brands on offer. Nevertheless, Royal Enfield (RE) would be forced to reconsider its pricing/brand strategy very quickly, which will in turn drive margin pressure,” the brokerage said in its report dated July 6.
The brokerage further said that it expects RE to be in a much better position to fight back once this competitive pricing stabilises. “However, if these competitive price points sustain for a longer-than-expected time, it would lead to further downside risks to our estimates,” it added.
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