The stock of Eicher Motors Ltd soared around 7% on Wednesday, hitting a new 52-week high of ₹7,805 following its stellar December quarter (Q3FY26) results.
Consolidated Ebitda rose 30% year-on-year to ₹1,556.7 crore, backed by 21% growth in bike volumes, sold under the brand, Royal Enfield (RE). The volume push came primarily from the domestic market, which grew by 24%, aided by the goods and services tax rate cut in September. Consolidated Ebitda margin improved by 130 basis points on-year to a six-quarter high of 25.5% led by lower other expenses, despite the company’s growth over profitability approach. Consolidated revenue improved 23% to ₹6,114 crore. Ebitda is short for earnings before interest, taxes, depreciation, and amortization.
For the nine-month FY26, volume rose 27%, and FY26 should outpace FY25 growth of 10% by a wide margin. Besides bikes, Eicher’s joint venture with AB Volvo for trucks and buses, Volvo Eicher Commercial Vehicles (VECV), also recorded strong 24% volume growth in Q3, to 26,086 units. Average realization for bikes was marginally up 0.8% on-year to around ₹1.82 lakh/vehicle, with Ebitda per vehicle rising 7% to ₹48,300.
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While bikes with more than 350cc had seen an initial dip because of the GST hike, demand for these segments is recovering, the management said. For FY27, it has guided for an industry growth rate in the high single digit, with the company outpacing the market. “RE faced a new wave of competition in 2023 from new bikes launched by Hero-Harley and Bajaj-Triumph; however, these bikes are selling just 1-6K in recent months (RE 10MFY26 average 92K/month),” said Jefferies India report dated 10 February. According to Jefferies, RE’s toughest phase of competition and margin concerns are behind.
With plants running close to full capacity utilization and sustained demand, Eicher is expanding capacity at the Cheyyar facility in Chennai. This would take its total capacity to 2 million vehicles annually, up nearly 35%, to be completed in phases by FY28. Eicher is seeing some pressure on raw material costs, mainly due to precious metals, but the price hikes taken in April and July have helped offset this. A price increase for select models in January should help improve margins marginally in Q4. Besides, the company has decided to hedge its exposure to precious metals to mitigate the impact of price volatility.
Meanwhile, the stock has rallied by nearly 56% over the last one year, rewarded for strong volumes. It is trading at 33.4x FY27 estimated earnings per share, slightly higher than its long-term average of 31x, showed Bloomberg data. While Eicher is poised to benefit from rising two-wheeler demand and premiumization, consistent volume growth is essential to justify the expensive valuation.
