BOFA Merrill Lynch has initiated a BUY Coverage on Eicher Motors with the following review,
Our demand model suggests India's leisure motorcycle market could register 38% CAGR over the next 5 years, nearly 2x earlier expectations. EML will be key beneficiary as it readies to scale its operations with an expanded facility (end-Q1 CY14), portfolio (Continental GT end-Nov) and network (5-6 distributors per month). We therefore revise our volume led profit forecasts by 36%-65% over CY14-15E.
Despite extended outperformance, we upgrade EML to Buy from Underperform. Key reasons: (1) sharp revision to forecasts, mainly due to motorcycles which contributes over 75% of profit, and (2) higher valuation multiples, also aided by reversion to FCFs. Our revised EPS forecasts are 6%-15% ahead of street over CY14-15E, and our price target of of Rs 6,000 (earlier Rs 2,845) offers 43% potential upside
