A key sits in the ignition switch of a Royal Enfield Motors Ltd. Classic 350 motorcycle. (Photographer: Dhiraj Singh/Bloomberg)

Goldman Asks Investors to Hop On to Royal Enfield Maker's Shares

(Bloomberg) -- Shares of Eicher Motors Ltd., which have soared almost 8,000 percent in the past decade, have hit a sweet spot, says Goldman Sachs Group Inc.

The stock is down 16 percent from its Sept. 8 record of 33,483.95 rupees even as the broad market posted a fresh record. Eicher’s retreat has pushed down the valuation to below its five-year average and presents a buying opportunity, according to analyst Pramod Kumar.

While the street took Eicher’s sequentially flattish third-quarter sales as signs of demand saturation for Royal Enfield -- a British wartime motorcycle brand -- the moderation was mainly due to plant rejig and model year change, Kumar wrote in a Jan. 18 note. He added the stock to regional conviction list with a target price of 35,208 rupees, implying a 26 percent gain from Friday’s close, when it had a market value of about $12 billion dollars.

Goldman Asks Investors to Hop On to Royal Enfield Maker's Shares

Network expansion and new models will lead to Eicher’s revenue and operating profit compounding at 25 percent and 30 percent respectively, over the fiscal 2017-2020 period, according to the note.

Eicher Motors is the best-performing company on the NSE Nifty 50 Index over the past 10 years, and one of the gauge’s two members with a five-digit price tag on its shares.

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