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Eicher Motors Ltd Research Report - 08th Feb 2016

Automobile | Published on Feb 06th 2016

IT

Results in line with estimates: Eicher Motors’ 4QFY2016 consolidated results have come in in line with our estimates. Consolidated revenues grew 45% yoy to Rs3,316cr, coming broadly in line with our expectation. The 2W business (Royal Enfield)’s top-line grew strongly by 55% yoy to Rs1,284cr, driven largely by volume growth. The VECV segment’s revenues grew 39% yoy, driven majorly by strong demand in the commercial vehicle (CV) segment and market share gains. Consolidated operating margins at 15.6% were in line with our estimates of 15.3%. Royal Enfield posted its highest ever margins of 28.6% (a 90bp sequential improvement despite slightly lower volumes due to disruption by Chennai rains). Royal Enfield’s margins were better than our estimate of 26.5%. The VECV segment’s margins at 7.4% were lower than our estimate of 8.1%. The consolidated net profit at Rs271cr was in line with our estimate. Outlook and Valuation: Demand for Royal Enfield continues to remain strong on increasing acceptance of leisure biking in India. The company continues to have an order backlog with higher number of orders being taken per month than the actual production despite huge capacity addition. Also, the company has recently introduced the 400cc adventure tourer bike “Himalayan” which is likely to boost demand going ahead. Also, commercial vehicle (VECV) business is witnessing strong demand given the recovery in the CV segment. We have marginally increased our earnings estimates given the margin beat at Royal Enfield. We maintain our Accumulate recommendation on the stock with a revised SOTP based target price of Rs20,044.

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Accumulate

CMP 18,128
Target Price 20,044
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)63,267.92
MCAP NSE (Rs in Cr)63,247.92
P/E (x)44.55
EPS (Rs.)522.03
BV (Rs.)1,134.41
Div Yield (%)0.43
FV (Rs.)10.00
P/BV (x)14.19
EV/Sales (x)4.01
EV/EBITDA (x)29.13

Shareholding Pattern (%)

Promoter51.0
Foreign34.0
Public & Others10.0
Institution3.0
Corporate2.0
Grand Total100.0

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