Eicher Motors extends fall on brokerage downgrade

Eicher Motors fell nearly 4% to Rs 18,750, extending its 2% decline in past two trading sessions on the BSE, after a domestic brokerage downgraded the stock on concerns that falling order book raises earnings risk.

According to IIFL Institutional Equities, the broking firm expect Royal Enfield (RE’s) order book to deplete in FY17 and result in lower volume growth in FY18.

Our dealer checks across states reveal that average waiting period for RE motorcycles is at 2.2 months vs. 5 months at 2014-end. Part of this is due to increase in production capacity; it is also due to new order generation falling below deliveries, said the report authored by Joseph George and Kevin Mehta.

Analysts expect the stock to de-rate as volume/earnings growth will fall, and depletion of order book will lead to volatility as monthly volumes will reflect concurrent underlying demand.

Meanwhile, in past three months, the stock had outperformed the market and gained 29% as compared to 1% decline in S&P BSE Sensex till March 11, 2016.

At 01:38 PM, the stock was trading at Rs 18,820 on the BSE. A combined 59,942 shares changed hands on the counter on the BSE and NSE so far.