Eicher Motors
Eicher Motors has moved higher by 5% to Rs 28,975 on the BSE after the company reported 25% year-on-year (YoY) growth in its consolidated net profit at Rs 5.76 billion in June quarter (Q1FY19). It had profit of Rs 4.60 billion in the same quarter last fiscal.
During the quarter under review, Royal Enfield posted its best ever performance. Revenue from operations rose 27% YoY to a record Rs 25.48 billion in the quarter. The Ebitda (earnings before interest, tax, depreciation and amortization) margin increased to 31.8% in Q1FY19 from 31% in Q1FY18.
In the Commercial Vehicles (CV) segment, Eicher’s joint-venture with Sweden’s AB Volvo VE Commercial Vehicles (VECV) continues to perform well. VECV’s revenue from operations rose by 45%, while net profit rose by 78% during the quarter.
“VECV is gearing up for strong growth in the coming months by leveraging new technologies and products, and by strengthening marketing activities and supply chain. The company is working to strengthen our market share across segments” said Siddhartha Lal, managing director and CEO, Eicher Motors.
The brokerages houses however have mixed view on the stock post Q1 results.
The analysts at IDBI Capital expect Eicher Motors to post growth of around 17% in Royal Enfield sales over FY18-20E as the brokerage firm believes volume growth would be lower due to high base.
“However we strongly believe that RE’s brand appeal, consumer preference for premium bikes, 650 twin launches, and higher export volumes would certainly help the company to increase their sales in coming years. Recent decline in share price led to change in our rating to BUY (earlier ACCUMULATE) with target price of Rs 32,400,” IDBI Capital said in result preview.
Thus far in the calendar year 2018, Eicher Motors had dipped 9% as compared to 12% rise in the S&P BSE Sensex till Thursday.
“VECV performance would continue to be strong on the back of favorable macro factors for CV demand. The company has lined up capex of Rs 8 billion in FY19 towards capacity expansion (Vallam Vadagal Phase II), new product development and tech centre in Chennai. We see growth receding for Royal Enfield but business prospects VECV looks encouraging. However, FY20E P/E of 25x looks expensive. We retain our Reduce rating with 12 month target price of Rs 28,355,” said analyst at IIFL Wealth Management.
