Strong volume growth in Uttar Pradesh, Bihar, Odisha, Jharkhand, Madhya Pradesh, and West Bengal, which accounts for only 25 per cent of Royal Enfield sales, shows there is scope for increasing the firm's share in these markets. Further, while its volume market share is estimated to rise form 6.4 per cent over 7 per cent by FY2020, its value share - given the rapid growth of the premium market and realisations - will increase to about 17 per cent. This, according to JM Financial, will make it the second-largest player after Hero MotoCorp in value market share.
The worry is over Volvo Eicher Commercial Vehicle (VECV) joint venture, which could see some impact from the implementation of axle load norms. While so far there has not been much impact, management believes VECV trucks are better placed as they generate more torque and power.
Currently, the stock is trading at 26 times its FY19 earnings, and factors in the moderation in growth rates as the high-based effect kicks in. Given the 25 per cent-odd earnings growth ahead, it could fetch good returns in a two-three year period.