Eicher races past M&M to become third most-valued auto company

Eicher Motors, the manufacturer of Royal Enfield motorcycles, has become the third most-valued automobile company in the country after Maruti Suzuki and Tata Motors.

On Monday, Eicher’s market capitalisation surpassed sports utility vehicle (SUV) major Mahindra and Mahindra’s (M&M)’s, with the latter taking a beating after news of a higher cess on SUVs and large cars under the goods and services tax (GST) regime.

Eicher has quickly moved from being the fifth most-valued automobile company about a week ago to the third position now, triggered by a surge in its stock price.

A week ago, Eicher had overtaken Pune-headquartered Bajaj Auto to become the most-valued two-wheeler maker in the country. That also made it the fourth-biggest auto firm in terms of market cap. The stock rally did not halt there. In the past one week, the company added ~5,300 crore to its market capital to touch a valuation of ~87,131 crore on the BSE when trading closed on Monday.

The stock closed at ~32,007.65, up 1.32 per cent over Friday. The scrip has rallied 42 per cent since January, and analysts continue to give a ‘buy’ call on it.

M&M’s stock closed the day at ~1,399.30, down 1.34 per cent from Friday. The news of an additional 10 per cent cess on SUVs weighed upon the scrip. On Friday, the company had announced a 12 per cent dip in the first quarter (April-June) profit to ~768 crore. The company has faced challenges in the SUV segment where its dominance has been challenged by Maruti Suzuki. The Suzuki-owned company has quickly gained market to emerge as the largest SUV player in domestic market, overtaking M&M.

Analysts do not see major triggers for a growth in M&M’s market share this year. The company’s commercial vehicle and tractor business, however, have posted growth.

Eicher, on the other hand, continues to post a strong double- digit growth in the high-margin motorcycle business, its main profit generator.

The products command a waiting period in most markets and, with an expanded capacity, the company is well-placed to create a new record in sales volume this year. Analysts do not see threat of a competition to Royal Enfield’s products in the near future. Eicher also makes commercial vehicles in collaboration with Volvo but its contribution to the profitability is small.