Eicher Motors Ltd. share price target

Q2FY21 results were subdued due to lower volumes, but came in above estimates. Revenue was marginally lower by 3% yoy at Rs21.3bn (est.: Rs21.8bn). EBITDA margin contracted 260bps to 22.1%, but was better than expectation of 18.7%, owing to betterthan-expected gross margin and lower Other expenses. We expect 2W volumes to rebound strongly, aided by ramp-up in production, healthy order-book, aggressive launches and focus on network expansion. Volume CAGR is...

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...

Royal Enfield's (RE) Q1FY21 consolidated revenue/EBITDA was above our estimates while company reported loss vs our estimate of profit. Revenue/EBITDA was higher than our estimates on account of BSVI related price hikes and lower operating expenses while PAT was lower than our estimates due to lower other income and higher effective tax rate. We believe 2W industry is likely to decline in mid-double digit in FY21 however decline in premium segment could be lower on account of strong order book/enquiry levels from rural/semi urban areas. We believe RE being a discretionary product; we expect muted demand post lockdown, given likely erosion of purchasing...

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.

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) 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...