Seminal year for industry provides interesting insights However, amid all the gloom, the engineering and production prowess of the industry (along with its value chain) shone brightly as it successfully completed the world's fastest switchover to Euro 6 equivalent emission norms i.e. BS-VI as per schedule. Much of the post festive period was focused on the transition, with the entire ecosystem estimated to have spent ~| 70,000 crore towards the technological leap. Covid-19 crisis struck India in the run up to April 2020, just as the changeover...

We are initiating coverage on Eicher Motors Ltd (Eicher) with a HOLD recommendation and a Target Price of Rs 2,400, which implies ~7% upside from the current levels

EML retains strong financial strength, possessing a net cash positive B/S with cash and liquid investments on books worth | 6,807 crore as of FY20 (i.e. ~11% of current market capitalisation). The company has historically demonstrated excellent capital efficiency (~18% RoCE as of FY20) in addition to a negative net working capital cycle and best-in-class margins (~24% as of FY20). Core financials, while still healthy, are expected to reach...

Eicher Motors posts net loss of Rs 55 crore, misses Street estimates For the quarter ended June 30, 2020, Eicher Motors' total revenue from operations was recorded at Rs. 818 crores, down by 66% as compared to Rs. 2,382 crores in the corresponding quarter of FY 2019-20; PBIDT was Rs. 52.52 crores as compared to Rs. 755.52 crores in the same quarter of the previous financial year. Royal Enfield sold 58,383 motorcycles in the quarter, a decline of 68% from 181,966 motorcycles sold over the same period in FY 2019-20....

Export opportunities and upgradation of consumer preferences will build strong growth over long-term. However, given short-term uncertainties, remain cautious on the stock and reiterate our HOLD...

This led to an increase in export share in total sales volume of 5.5% in FY20 (v/s 2.4% in FY19), mainly driven by the launch of 650cc Twins. It reflects the companys confidence in its new REs new mix of semi- synthetic oil helped it to extend the service and oil- change intervals for its Unit Construction Engine (UCE) based models It has brought down the in-use ownership cost of the motorcycles by The Make Your Own (MYO) program was launched in FY20 to enhance the customers purchase experience. The new vehicles are indigenously developed with two new engines (2L and 3L Operations for VECVs started operations at its new plant at Bagroda, near Bhopal, for the assembly of new engines for the Pro 2000 series with delivery expected in VE Powertrain (VEPT) engines sales declined 28.7% to 28,383 units. CFO from operations declined 30% to ~INR6b due to EBIT loss of ~INR83m (v/s ~INR5.98b profit), partially offset by lower tax and reduction in overall working capital.

The stock (37.9x/27.6x on FY21/22E earnings) at current levels is adequately factoring in the recovery in our view. We have a REDUCE rating on the stock. While Eicher reported a 1QFY21 loss of Rs 552mn, the demand outlook at Royal Enfield (RE) has surprised on the upside. The management highlighted that RE bookings have reverted back to pre-COVID levels, however supply chains constraints are impacting production (operating at 40% levels). Eicher Motors will acquire the bus business of Volvo India as the OEM is consolidating its presence across the CV sub segments.

Product / Network focus can be growth enabler in challenging times Eicher Motors reported 1QFY21 standalone PAT at Rs123mn, down by ~97.5% YoY mainly on account of lower EBITDA margin and higher depreciation, partially offset by lower tax rate and was below our estimate. Revenue stood at Rs7.69bn, down ~67% YoY due to a ~69% decline in volume. ASP improved by 4.8% YoY due to BS-VI related price increase. EBITDA margin stood at 0.2% on account of negative operating leverage, one-time incentive schemes offered to dealers (impact of ~400bps) and higher BS-VI cost (only BS-VI related cost is passed without margin). In April, RE took an on-road price increase of Rs3,000 (passthrough to RE will be lower) to pass on some of BS-VI costs. The company opened 38 studio stores during the quarter, taking its total count to 638 stores. It intends to keep expanding the studio format as it sees...

Eicher Motors (EIM) Q1FY21 EBITDA/PAT number below our estimate. Revenue de-grew by 66% YoY to Rs.8.18bn led by 68% YoY fall in volume. EBITDA de-grew 99% YoY to Rs.38mn (vs est. Rs 646mn) with margin at 0.5% due to negative operating leverage. Enquiries and booking are almost back to pre-covid level for RE, however production was severely impacted due to frequent lockdowns in Chennai, affecting availability of products. Strong demand was witnessed in Tier 2/3 cities and rural areas, while demand in larger...

Domestic CV industry remains beset by various demand side (soft economic activity, sluggish freight movement) and supply side (excess capacity, high installed base, stringency in financing) issues, with demand outlook yet to take a turn for the better amid missing green shoots. EML's exposure to the sector through 54.4% stake in VECV is likely to eat into expected improvement on the 2-W side and, thus, crimp overall profitability. We build | 72.3 crore as share of losses from VECV in FY21E and with recovery of CV...

Eicher Motors (EIM) reported in-line Q1FY21 revenue but dismal operating margins at 0.2%, primarily due to higher input costs and lower operating efficiencies.

Volvo Buses India to integrate with VECV- The transaction will include tranfer of bus manufacturing facility at Hisakote, Bangalore and all employees. We downgrade EIM to Accumulate as we think recent valuation catch-up at 27x/23x FY22/23 EPS factors in near to med term positive. Structurally we remain positive on key factors such as 1) RE's under penetration in key motorcycling states (market share of <4% v/s national average of 6%) and 2) RE's monopoly for upgrade options in >300CC segment. In 1QFY21 EIM's...

Eicher Motors Ltd.'s quarterly profit fell as the nationwide lockdown that was imposed to contain the Covid-19 outbreak battered its already slowing sales. Net profit of the maker of Royal Enfield motorcycles fell 44% year-on-year to Rs 304.3 crore in the quarter ended March. Its sales fell by a fifth over the year-ago period during the three months ended March. In March alone, sales volumes fell 41%, in line with its peers. That also hurt the company's revenue, which dropped 11.7% to Rs 2,208 crore. OPM of the company stood at 18.94% compared to 27.39% in Q4FY19. As a result operating profits reported profit of Rs 418.17 crore compared to profit of Rs 684.69 crore. Other income...

Product / Network focus can be growth enabler in challenging times Eicher Motors reported 4QFY20 standalone PAT at Rs3.46bn, down by ~28% YoY mainly on account of lower EBITDA margin and higher depreciation, partially offset by lower tax rate. PAT was ~23% below our estimate. Effective tax rate for the quarter was 29.2%. Revenue stood at Rs21.8bn, down 12.8% YoY due to a 17% decline in volume. ASP improved by 6.0% YoY as 2/3rd of the volume for the quarter comprised BS-VI models. EBITDA margin for the quarter stood at 23.1%, down 470bps YoY and 210bps QoQ on account of negative operating leverage, change in mix towards BS-VI models (relatively lower margins) and higher ESOP expenses. Volatility in forex and one-off provision for the...

~90% dealerships have resumed operations. However, expect some supply chain hinderance in the short run. BS6 retail sales were ~60% in 4QFY20. Adjusted for one-offs (recall and currency loss in exports markets) EIM consolidated performance were in-line with margins at 21.8% (-550bp YoY). This is a good margin performance in weak demand conditions. However, VECV performance looked weak with miss in margins at 1.8% (PLe 3.6%) and PAT loss at Rs260mn (PLe profit at Rs40mn). Going forward we believe...

14 June 2020 EIM posted the lowest EBITDA margins in six years due to one-off costs, the impact of BS6 cost inflation, and op. However, bookings have normalized, which is a positive surprise, although production ramp-up remains bottlenecked. New product launches would further aid demand. We cut FY21/FY22 EPS estimates by 29%/10% to factor slower production ramp-up for RE and challenges in VECV volumes. Maintain Buy, with TP of ~INR19,700 (Jun22 SOTP based). revenues / EBITDA / PAT declined ~12%/37%/44% to ~INR22b/INR4.3b/INR3b. INR135.5k) as 75% of Wholesale was BS6 models. as it did not entirely pass over the BS6 cost inflation. a) the recall of products in the US/EU and b) adverse Fx impact for LatAm subs. Also, employee cost was higher due to ESOP expenses.

We re-iterate our REDUCE rating on the stock. Eichers 4QFY20 results were a mixed bag while REs adj. EBITDA margins came in at 23.1% (-210bps QoQ), which was above estimates, VECV reported a loss of Rs 260mn due to the challenging demand environment. We will monitor the margin trajectory at RE, particularly at a time when the demand environment remains uncertain.

Eicher Motors (EIM) reported in-line Q4FY20 revenue but disappointing operating margins at 20.8%, the lowest in the last eight quarters.

EML possesses net cash positive B/S with cash on books and liquid investments of | 5,944 crore as of FY19 i.e. 15% of current market cap. Double digit return ratios (~22% RoCE as of FY20E), negative working...

In the mass market segment, we prefer Hero (BUY) due to the OEMs dominant market leadership in the entry/executive (Hero has 52% market share in the domestic motorbike segment). However, Bajaj (ADD) will be impacted by a weakening outlook for the high growth export markets, which account for almost half of its volumes. The two-wheeler landscape has changed particularly for the global premium lifestyle biking category, which is witnessing multiple structural/cyclical headwinds. While near term demand will be impacted due to the COVID situation, longer term demand for cruiser bikes is stagnating due to changing consumer habits, which is prompting Harley Davidson to diversify beyond its traditional segment. We believe these factors will impact Eicher Motors (REDUCE) export initiatives. Further, Royal Enfields (RE) strategy of driving sales from Tier III/IV towns in India will be delayed at a time when demand in key southern states will be impacted due to falling remittances from overseas.