Shares of Eicher Motors Ltd surged nearly 7% in early trade on May 12, a day after the company reported better-than-expected earnings for the March quarter despite a slump in its two-wheeler business.

At 9:50 am, the stock traded at Rs 3,626 on the BSE, up 6.5% from its previous close, while the benchmark Sensex rose 0.44% to 61,632.

The company posted a consolidated net profit of Rs 905.58 crore, up 48.42% from Rs 610.14 crore in the same period last year.

The higher profit was mainly due to higher-than-expected average selling prices (ASP), favourable raw material (RM) tailwinds and higher-margin spare parts mix, the company said on May 11.

In an exchange filing, Royal Enfield Manufacturers said operating income stood at Rs 3,804.32 crore, up 19.13% from Rs 3,193.2 crore in the same period last year.

Several brokerages are acting cautiously in anticipation of increased competition. The upcoming launch of Bajaj-Triumph and Hero-Harley in the motorcycle segment above 250 cc is expected to intensify competition.

Kotak Institutional Equities maintained its “sell” call with an unchanged target price of Rs 2,900 per share.

Jefferies remains bullish on Eicher, citing an expected recovery in two-wheeler demand, premiumisation of the industry and growing exports, among other factors.

But Jefferies has lowered Eicher’s priority in the face of forthcoming offerings from competitors. It still has a “buy” rating on the stock.

Motilal has downgraded the stock to “neutral” from “buy”.