Stock Fundamentals

Eicher on a slippery slope

Parvatha Vardhini C | Updated on October 07, 2018 Published on October 07, 2018

The Eicher Motors stock shed 13 per cent last week and over 25 per cent in the last one month. Apart from the rub-off of the nervousness in the markets in general, the strike at the Royal Enfield plant at Oragadam near Chennai has been a dampener.

The company reported a production loss of 10,000 motorcycles in September 2018, due to a section of the workers not reporting to work beginning September 24. Partly due to this, sales volumes for September grew only by 2 per cent over the same month in 2017.

While the facility became operational on September 29, production is yet to scale up to usual levels. With both commercial-vehicle and premium-bike sales in top gear, the stock has been a multi-bagger, moving up six-fold in the past five years. The recent correction brings down its valuation (PE ratio) to 28 times its trailing 12-month consolidated earnings, from 40 times at the beginning of this year.

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