Eicher Motors' Q2 Earnings: Mixed Reactions from Brokerages Amid Valuation Concerns

Brokerage on Eicher Motors:Eicher Motors’ September-quarter earnings have drawn a mixed response from brokerages, with most acknowledging the company’s strong volume-led growth but questioning the sustainability of margins and the premium valuation the stock currently commands.Emkay Global said Eicher Motors delivered an in-line performance in Q2, withrevenue rising about 45 per cent year-on-year (Y-o-Y) to ₹6,070 crore, powered by a 43 per cent Y-o-Y surge in Royal Enfield (RE) volumes to nearly 3.26 lakh units. Ebitda grew 39 per cent to ₹1,510 crore, translating into a margin of 24.5 per cent, compared with 23.9 per cent in the previous quarter. Adjusted profit after tax climbed 25 per cent Y-o-Y to ₹1,370 crore.The brokerage highlighted management’s upbeat commentary, noting that festive-period retails in September-October were up 45 per cent Y-o-Y and were expected to remain strong into the second half due to GST-driven demand tailwinds and rural recovery. It pointed out that the 350cc lineup continues to be the primary demand driver, supported by online conversions and model refreshes. While the 450cc and 650cc segments saw some weakness after September 22, the latter is showing “relatively better signs of recovery,” Emkay said.Capacity utilisation remains high at roughly 1.2 million units, and efforts to debottleneck production could lift capacity beyond 1.35 million units. Emkay expects robust volume traction in the near term, building in a 19 per cent run-rate for the rest of FY26 and moderating growth in subsequent years. Even so, it flagged stretched valuations at “29x Sep-27E price-to-earnings (PER),” and retained an ‘Add’ rating with a target price of ₹6,900.CATCH STOCK MARKET LIVE UPDATES TODAYJM Financial noted that Eicher posted a consolidated operating margin of 24.5 per cent in Q2FY26, about 50 basis points (bps) below its estimate. Both domestic and international RE businesses performed strongly, with volumes rising 42 per cent and 55 per cent, respectively. JM said management remains “cautiously optimistic” amid global uncertainties, but domestic demand remains supported by GST rationalisation as well as RE’s ongoing brand-building and marketing initiatives.Also ReadJubilant FoodWorks shines among QSR players in Q2; should you buy shares?Welspun Living slides 3% as analysts flag US tariffs as near-term overhangIndusInd Bank share price gains 12% in 3 days; stock up 21% from Sept lowsGroww shares up 53% against issue price in 2 days; market-cap nears ₹1 trnBuy, sell or hold: What to do with Info Edge (India) stock after Q2 show?The brokerage raised its revenue forecasts for FY26 and FY27 by 5.9 per cent and 11.2 per cent, respectively, citing healthier-than-expected demand after the GST-led boost.However, JM cautioned that the company is deliberately trading off margins for volume gains. It added that raw material inflation, competitive pricing on new models and elevated marketing spending would likely restrict margin expansion. Rolling forward estimates to FY27 and FY28, JM downgraded the stock to ‘Reduce’ under its updated framework, with a target price of ₹6,750, valuing RE at “28x vs. 26x earlier” and VECV at 15x EV/Ebitda.Motilal Oswal said Eicher’s PAT of ₹1,360 crore missed its estimate of ₹1,440 crore due to softer margins in both segments. Despite a robust 43 per cent Y-o-Y jump in volumes, operating margins contracted 140bps Y-o-Y to 24.9 per cent as the company prioritised growth over profitability. The brokerage said RE’s strong domestic volumes in FY26 thus far were largely driven by the GST rate cut, but demand appeared to have normalised after the initial boost.Motilal Oswal noted that management’s focus on “growth” over “profitability” would cap margin upside. It expects RE to record a revenue, Ebitda and PAT CAGR of 14 per cent, 14 per cent and 12 per cent respectively over FY25-28. With earnings growth likely to moderate, it said the stock does not justify premium valuations, reiterating a ‘Sell’ rating with a target price of ₹5,846, valuing RE at 26x Sep-27E EPS and VECV at 11x EV/Ebitda.Those at Nuvama Institutional Equities reported that Eicher delivered a 45 per cent Y-o-Y revenue jump, broadly meeting its estimate, with Ebitda rising 39 per cent. It expects volume momentum to continue on the back of strong demand for key models, Classic, Bullet and Hunter, along with sustained marketing efforts. Export demand is also likely to remain robust, supported by expansion in existing markets and new product introductions.Thus, Nuvama forecasts a revenue and earnings CAGR of 14 per cent and 13 per cent over FY25-28 and maintained its ‘Hold’ rating with an unchanged ₹6,900 target price, valuing RE at 30x Sep-27E P/E and VECV at 20x EV/Ebitda. It said upside remains limited at current levels, with the stock trading at 30x and 27x FY27E and FY28E earnings, respectively.While brokerages acknowledge Eicher’s strong operating momentum, most remain cautious on valuations and margin pressure, resulting in a split between hold, reduce and sell calls.