Eicher Motors rises 3% despite fall in Q4 profit; ICICI Sec downgrades stk

Shares of Eicher Motors rose 3 per cent to Rs 17,367.85 on the BSE even after the company reported a 44.22 per cent decline in March quarter (Q4FY20) consolidated profit after tax (PAT) at Rs 304 crore. Its consolidated total revenue from operations stood at Rs 2,208 crore for the quarter under consideration as against Rs 2,500 crore for the same period of the previous year.


Royal Enfield sold 1,63,083 motorcycles in the fourth quarter, a decline of 17 per cent from 1,97,567 motorcycles sold over the corresponding period in the last financial year, the company said.


For the financial year 2019-20, the company reported a PAT of Rs 1,827 crore as compared with Rs 2,203 crore in 2018-19.


Royal Enfield''s total revenue from operations was down by 7 per cent to Rs 9,154 crore, compared with Rs 9,797 crore recorded for the year ended March 2019.


The company sold 6,97,582 units during the 2019-20, down 15 per cent from 8,22,724 units in 2018-19.


Eicher Motors' Managing Director Siddhartha Lal said 2020 has turned out to be a tough year overall for the industry, and the global pandemic during the last quarter brought with it unprecedented challenges and disruptive changes.


"Now, as the lockdown is easing out, the company is witnessing strong initial customer interest and confidence," Lal said.


Meanwhile, Eicher Motor also announced a stock split of 10 shares for every share held. "The board has approved sub-division of equity shares of the company from the existing one (1) equity share of face value of Rs 10 each into ten (10) equity shares of face value of Re 1 each," it said in an exchange filing.


At 9:40 AM, the stock was up 1.42 per cent at 17,100 levels. Around 1.38 lakh shares have changed hands on the NSE and BSE combined so far.


Brokerage Motilal Oswal maintained 'Buy' on the stock with target price of Rs 19,700, but cut its FY21/FY22 EPS estimates by 29%/10% "to factor slower production ramp-up for RE and challenges in VECV volumes".


"EIM posted the lowest EBITDA margins in six years due to one-off costs, the impact of BS6 cost inflation, and op. deleverage. However, bookings have normalized, which is a positive surprise, although production ramp-up remains bottlenecked. New product launches would further aid demand," the brokerage said.


On the other hand, analysts at ICICI Securities downgraded the stock to 'Add' from 'Buy' wth a revised target price of Rs 18,078 from the earlier Rs 17,815.


"In the near term, discretionary demand is expected to remain weak as customers could tighten their purse strings. However, RE’s strong brand equity and new products launches could help it limit the impact of this headwind. Over the medium to long term, we believe, the premiumisation theme will play out in 2Ws. We trim our EPS estimates for RE by 9.2%/2.8% for FY21E/FY22E, and raise our RE valuation multiple at 22x FY22E EPS (earlier: 21x)," the brokerage said.