Target: ₹4,125

CMP: ₹3,737.25

Royal Enfield (RE) domestic sales contracted 13 per cent CAGR over FY19-22 led by multiple headwinds. Covid-led lockdowns and higher vehicle prices on account of commodity inflation, weak consumer sentiments, and supply-chain constraints led to lower sales. However, both demand and supply constraints are easing now and lowering commodity prices coupled with vehicle prices that are expected to remain stable would drive an uptick in sales moving forward.Our channel checks suggest 20 per cent higher enquiries and footfall in September 2022 and strong customer response towards the newly launched Hunter 350.

RE’s wholesale sales number stood at 70,112 in August 2022, up 53 per cent year on year and 26 per cent m-o-m, indicating an easing of production constraints. If the prevailing sales volumes sustain, RE will transition toward a volume growth phase. Against this backdrop, September 2022 wholesale numbers will be key monitorable to ascertain whether production issues are over. With robust demand, expansive product portfolio, easing supply chains, expanding distribution network, and rapidly growing international sales, we model volume growth of 19 per cent CAGR FY22-25.

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