Eicher Motors, maker of popular Royal Enfield motorcycles, saw its shares tumble by almost 7% on February 11 after the company released its third-quarter (Q3 FY25) financial results. This sharp movement came despite the company reporting strong financial growth in terms of revenue and profit, showing a solid performance in its motorcycle and commercial vehicle segments. The fall in share price was mainly due to a target price cut by Goldman Sachs, which revised its price target downwards to ₹5,900 from ₹6,000.
In this blog, we’ll dive deeper into Eicher Motors’ Q3 performance, and the reasoning behind Goldman Sachs’ downgrade, and analyze the implications for investors moving forward.
Eicher Motors Q3 FY25 Performance
Eicher Motors reported impressive figures for the third quarter of FY25. The company posted an 18% year-on-year (YoY) increase in its net profit, which amounted to ₹1,170 crore, compared to ₹995.97 crore in the same quarter last year. This profit growth was driven by a solid increase in revenue, which surged by 19% YoY to ₹4,888 crore in Q3 FY25 from ₹4,116 crore in Q3 FY24. The company’s EBITDA also grew by 10%, rising to ₹1,201 crore from ₹1,090 crore in Q3 FY24, showcasing strong operational efficiency.
Royal Enfield’s Record-Breaking Performance
A major contributor to this growth was the stellar performance of Royal Enfield, the company’s iconic motorcycle brand. The mid-size motorcycle segment continues to see strong demand, and Royal Enfield posted its highest-ever quarterly sales volume, delivering 269,039 motorcycles, which represents a 17% increase compared to the 229,214 motorcycles sold in Q3 FY24.
The reasons that led to such a good show by Royal Enfield include its successful product launches, strategic improvement in operational issues, and also an effective campaign during the Indian festive season. According to B Govindarajan, chief executive officer at Royal Enfield, the well-built operational strategy over the year ensured that it was well-equipped for high volumes during the festival season.
VECV Performances
Other than Royal Enfield, Eicher Motors’ joint venture VE Commercial Vehicles also performed well. VECV revenue stood at ₹5,801 crore with a 6% YoY growth. Its EBITDA stood at ₹509 crore with a 16% growth YoY. The PAT for the company rose 44% at ₹301 crore. VECV achieved the highest ever quarterly sales volume selling 21,012 vehicles in Q3 FY25 against the 20,706 units sold in Q3 FY24.
Despite the general market slowdown in commercial vehicles, the company still widened its market, which reflects resistance and actual strength even during a tough time in the marketplace.
The downgrade by Goldman Sachs: Why is the Stock Plunging
Although Eicher Motors reported a strong performance in Q3, the company’s stock price dropped sharply after Goldman Sachs downgraded its target price for the stock from ₹6,000 to ₹5,900, a reduction of approximately 12.5%. Goldman Sachs also maintained a “Buy” rating for the stock but cited several factors for the downgrade, including concerns over the company’s marketing expenses and expected moderation in performance for the fiscal year 2026 (FY26).
Factors Behind the Downgrade
It’s one of the major reasons behind Goldman Sachs trimming the target price: increased marketing expenses. Despite Eicher Motors reporting a high growth in Q3, at the same time, it’s also observed that marketing expenses are on the higher side. A brokerage house called this out as one of the major factors expected to affect EPS growth for FY26.
The other one is Diverging Regulatory Price Hikes. Goldman Sachs concluded in their report that compared with its industry peers, Eicher Motors’ price hikes, inspired by the regulatory changes, have been much more diversified. In this way, while the broader industry can easily pass on the raise in price due to regulatory changes, the same might be a problem for Eicher Motors, especially if the regulatory changes continue.
- Moderation in New Business Premium Growth: The brokerage firm also pointed out that though the company has seen good growth in the last few quarters, it is expected that this momentum may moderate in FY26, especially in the core motorcycle business. Goldman Sachs indicated that the volume growth of the company may not be as strong as it has been in the last few years.
- Stock Valuations: The second reason for downgrading is a concern over the company’s current stock valuation. While the firm is performing extremely well, Goldman Sachs feels that the stock is perhaps overvalued in anticipation of moderation in growth. The recent rally in the stock has also priced in some of the positive expectations, the firm feels.
Impact on Eicher Motors’ Stock Performance
Eicher Motors, which had been in an uptrend, saw the stock price plunge after the downgrade. The stock fell as much as 6.8% during the trading day, reaching an intra-day low of ₹4,966.15. The stock is now more than 10% below its all-time high of ₹5,551.75, recorded earlier in February 2025.
Despite this decline, the stock still trades well above its 52-week low of ₹3,675, registered in March 2024. The stock has rallied nearly 39% from that low indicating that investors are still reasonably positive about the long-term future of the company, even as they grapple with short-term volatility.
Analysts’ Outlook on Eicher Motors: Share Price Forecast
Goldman Sachs downgraded Eicher Motors’s target price but retained a “Buy” rating. The short-term trend for the Eicher Motors stock is still sideways, Ruchit Jain, Vice President of Equity Technical Research at Motilal Oswal Financial Services said. “The support seen is at the ₹925 level and the resistance placed around ₹992-₹1,000 levels.” Jain feels a directional move in the stock would be seen only when it breaks above the ₹1,000 level.
While the company has been downgraded, some analysts are quite optimistic about the growth of the company, especially in the case of a commercial vehicle. VE Commercial Vehicles does seem to be going extremely well, and analysts seem to be very positive about the coming quarters as well. In addition, Royal Enfield has also done quite well in mid-size motorcycles, and the company seems to be well-positioned to capture all the growth happening in India and the rest of the international markets.
What does the future hold for Eicher Motors?
Going forward, Eicher Motors faces both its pitfalls and opportunities. The group has shown strength in its operations, from the success of Royal Enfield to VE Commercial Vehicles. The commercial vehicle space is promising, and therefore, an increase in market share is expected to add more momentum to the company. However, increasing the cost of marketing and moderate growth expectations weigh on the near-term stock.
Furthermore, regulatory price increases and the ability to pass through price increases will be a challenge to the margins of the company. The stock will continue to be under pressure from investors on valuation, especially as growth slows in FY26.
However, Eicher Motors has a strong brand in Royal Enfield and a diversified portfolio in the commercial vehicle market, which would be a great omen for its long-term growth. Management, led by Siddhartha Lal, still seems to be confident about the trajectory, and efforts toward improving its market position may come in handy in the coming years.
Conclusion: Balanced View on Eicher Motors
The company has seen very good financial performance, citing high demand for its Royal Enfield bikes as well as in commercial vehicle operations. This apart, even after being downgraded by Goldman Sachs recently, the long-term growth of the company in these business areas looks promising. However short-term challenges like increased marketing expenses and regulatory hurdles might weigh it down on the stock side in the near term.
As always, investors should really weigh the good and bad from any investment, and for an investor with a long-term vision, Eicher Motors still has that compelling story that will attract; however, one with a view of short returns may face much turbulence as these challenges are expected to be presented.
Ultimately, it will be important to see how Eicher Motors maintains its competitive advantage in both motorcycle and commercial vehicle markets to ascertain its future performance.
0 Comments