Centrum Broking

Target: ₹3,200

CMP: ₹2,678.55

Under the leadership of Vinod Dasari, Royal Enfield (RE) is focusing on three key strategies: Intense product launch pipeline with a new one every quarter for next 6-7 years; rapid expansion of distribution network using the new studio store format to increase penetration in low market share geographies, 900 added in last 18 months; and improving share of revenue from the higher margin Exports and Solutions business.

Competition in the 250cc+ segment has been on the rise as more companies such as Honda Motorcycles and Scooter India, Classic Legends-Jawa, Benelli have launched competing models and as more players are looking to enter like – Bajaj Triumph, Hero Harley, Classic Legends-BSA, etc, this segment is going to get crowded.

Over the last 18 months, company has added 900 studio stores. Studio store is a unique compact store format with offering of Sales, Service and Spares and is fully compliant with RE’s brand identity.

Company has been increasing its foot print in the overseas markets in the form of exclusive outlets, multi brand stores, and CKD facilities. Currently, RE has opened 98 exclusive outlets over 25 countries, 649 multibrand outlets, marketing companies in USA, UK, Thailand, Brazil and a CKD assemble plant in Argentina.

We assume coverage on Eicher Motors with a price target of ₹3,200 and Buy rating.