Eicher Motors Shares Surge 10% as 1:10 Stock Split Effect
Shares of Eicher Motors today surged as much as 10%, making it the top gainer on the Nifty in percentage terms, as the 1:10 stock split took effect from today. It was the third day of gains for the Royal Enfield motorcycle-maker. The company's board had in June approved a stock split in the ratio 1:10, giving its nod to sub-division of equity shares of the company from the existing one (1) equity share of the face value of Rs.10 each into ten equity shares of the face value of Re 1 each. Eicher Motors shares were currently trading 7% higher at ₹2,321 as compared to a 0.5% gain in the Nifty 50 index. Eicher Motors shares had closed 1.5% higher at ₹21,702 (pre-stock-split). Auto stocks have outperformed this month on hopes of a recovery in sales as more parts of the economy reopens. The Nifty auto index has jumped 11% in the past one month as compared to a 2% advance in the Nifty50 index. Domestic brokerage, Edelweiss has a hold rating on Eicher Motors shares.
"Demand (for RE) from semi-urban and rural towns has picked up well and RE’s network of studio stores across the country has been able to cater to this demand. Bookings are almost back to pre-COVID-19 level and inquiries are at par with pre-COVID level. Management believes the spike in the booking is not merely because of pent-up demand as bookings and enquires continue to improve MoM," the brokerage said, adding that Eicher Motors remains a key beneficiary of the shift in demand towards more than 250cc motorcycles given the ongoing premiumization trend. Eicher Motors had reported a consolidated net loss of ₹55 crore for the first quarter ended June 30 as sales were impacted hit due to the COVID-19 pandemic.
The company had posted a net profit of ₹452 crores in the April-June period of last fiscal. Total revenue declined 66% in the first quarter to ₹818 crores, as compared with ₹2,382 crores in the same period of 2019-20. Commenting on the results, Eicher Motors Managing Director Siddhartha Lal said: "The previous quarter put forth unprecedented challenges for the industry and for Eicher Motors. However, we believe that the long term potential for both Royal Enfield and VECV is very promising." Royal Enfield had reported a 26% decline in total sales at 40,334 units last month. The company had sold 54,185 units in the same month last year. Domestic sales were at 37,925 units, as against 49,182 units in the same month last year, down 23 percent.
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