Nifty Futures >> Royal Enfield needs a new hit to maintain its reign over mid-sized motorcycles

Eicher Motors Ltd, the maker of Royal Enfield motorcycles, saw its stock gain 1.5% on Monday after it said over the weekend that it had begun commercial production at a new facility. The plant will take the company’s motorcycle manufacturing capacity to 825,000 units this fiscal year and 900,000 units next year, which provides headroom for earnings growth, given that deliveries of its key motorcycle models—Classic 350 and Bullet 350—continue to lag demand.

Conversely, the plant will also raise the growth challenge. A high base slowed Royal Enfield’s volume growth from 68% in FY16 to 31% in FY17. Analysts’ estimates peg volume growth in the current and next fiscal years at 21-32%, which is good considering that two-wheeler sales in India increased less than 10% last year and so far this fiscal year.

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