Eicher on a slippery slope

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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