Royal Enfield opened its first pre-owned motorcycle store Vintage this year in Chennai.
Shares of two wheeler companies were under pressure with Hero MotoCorp and TVS Motor Company hitting their respective 52-week lows and Bajaj Auto trading close to its 52-week low, falling up to 7% on the BSE in early morning trade on Monday.
TVS Motor Company slipped 7% to Rs 524 on the BSE in intra-day trade. Hero MotoCorp skid to its 52-week low of Rs 3,266, down 3%, extending its 4% decline in the past two trading days ahead of June 2018 (Q1FY19) results on Wednesday, July 25, 2018.
Bajaj Auto was down 3% at Rs 2,757, extending its Friday’s 9% decline after the company reported a disappointing performance in Q1FY19 as reported Ebitda (earnings before interest, taxes, depreciation and amortization) margin remained flat at 18.4% as compared to a year ago. It was 20.9% in March 2018 quarter.
“Despite the benefit of the rupee’s depreciation, EBITDA margins weakened by 200bps QoQ, led by price cuts in domestic motorcycles and commodity cost pressures. The management’s intention to forge ahead with its aggressive pricing strategy in domestic motorcycles, amidst higher commodity cost pressures, will sustain the pressure on margins”, analysts at SBICAP Securities said in result review.
“Bajaj Auto’s exclusive focus on motorcycles has severely dented its domestic franchise (market share decline of 900bps to 9.8% over FY12-FY18). The recent price-cut led volume spurt is unlikely to sustain and could intensify the pressure on margins. Despite the strong outlook on 3Ws and exports, we cut our FY19e/20e EPS by 2%/3% in the light of ongoing profitability challenges. While we expect the domestic franchise to remain challenged, we reiterate HOLD in view of reasonable valuations,” said brokerage firm in report.
