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.

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.

©2018 Bloomberg L.P.

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