Eicher Motors, a manufacturer of marque Royal Enfield motorcycle, may see renewed investor interest -thanks to attractive relative valuation and superior earnings growth when compared with two-wheeler industry average.Two-wheeler stocks such as Hero Moto, Bajaj Auto and TVS Motor have surged about 3045% over the past year due to a recovery in the motorcycle volume growth and are expecting gains once Goods and Services Tax (GST) is implemented. Eicher's PE has compressed to 30 times of FY18 earnings against 45 times a year ago.The reduction in Eicher's PE premium comes amid improved earnings visibility. Besides, the number of days for which sales are outstanding for Eicher is one of the lowest among peers.The company's average realisation per unit has increased by 3% annually in the past five years reflecting stronger pricing power. It was able to hike prices twice a year, thanks to strong brand equity .In addition, the GST implementation and increasing preference of consumers to premium products will benefit profitability. These factors make Eicher's stock more attractive in the two-wheeler segment.

Source: Economic Times September 15, 2016 03:22 UTC