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Royal Enfield (RE) has launched yet another new product—Guerrilla 450, a roadster 450cc motorcycle based on the ‘Sherpa 450’ platform, as seen in the new ‘Himalayan 450’. This will be RE’s first attempt at the sports segment, a far cry from its strength around classical/retro-looking bikes offering relaxed riding. The segment has been dominated by the likes of Bajaj/TVS with only ~10k units/mth, despite new launches by Bajaj (Triumph) and Hero (Harley). We believe the new launch is unlikely to garner more than 2-3k units/mth (akin to ‘Himalayan 450’). Despite building-in cyclical recovery and competitive cycle being largely behind, structural growth woes continue to haunt RE. We retain SELL on the stock, raising our TP to Rs3,750/sh at 22x core Jun-26E PER + VECV stake (Rs3,400, 20x Mar-26E earlier) as the competitive cycle is now behind.

450cc segment growth to be gradual; Guerrilla unlikely to majorly add volume

RE’s ‘Guerrilla 450’ (Exhibits 1-3), based on the Sherpa 450 engine platform, is another attempt by the company to grow in the 450cc category – this time in the sport segment (usually dominated by Bajaj/TVS), a departure from other companies typically tending to attack RE’s stronghold (cruiser motorcycles). However, amid the gradual pace of evolving consumer preferences (the Indian market tends to prefer relaxed riding, aircooled motorcycles; refer to our Expert Call note with AutoCar Bike Editor), the model may not meaningfully add to overall volumes. Further, given the aggressive pricing (introductory price of Rs239K ex-showroom), there could be some internal cannibalization as well, in our view.

Competition launches yet to fire; RE’s community pull remains key advantage

Nearly a year after launch, competition (Hero – Harley; Bajaj – Triumph) is yet to make a meaningful mark in the 450cc space, with the recent combined monthly volume average at ~4K units despite ramp-up in footprint. We note that >50% of Triumph sales till date are attributed to exports. The 450cc space overall remains miniscule (forms less than 1% of the domestic motorcycle industry). While the Triumph and Harley launches in Q2FY24 led to a spike, segmental volumes have thereafter stabilized at ~8-10K units/mth (Exhibit 5). Per industry checks, RE’s deep customer/community connect (events, rides, etc) remains a key differentiator – which the competition, despite enjoying a strong brand recall, has been unable to replicate.

RE continues to underperform the industry; structural growth trials remain

RE has underperformed the 2W industry over the past several quarters (wholesales and retails), with overall company volumes now stable (~75K units/mth), even as the overall over-250cc motorcycle category as a whole has not been growing either (clocking ~235K units/Qtr on average; Exhibit 6), as against the ongoing growth in the wider industry. Notably, new launches for RE in the past few years have largely not been able to add incremental volumes (excl. Hunter, which has also stabilized now; Exhibit 7). We believe upgrade and replacement demand for RE remains largely elusive; thus, its several product actions lined up in coming times are unlikely to automatically translate into additional growth, in our view.

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