Eicher Motors Ltd. share price target

We retain BUY with a target price of Rs 1714 valuing the company at 26x FY23E.

EML said (1) present production run rate of 75,000 units/month is pretty much sustainable, (2) demand is returning from mature markets like Tamil Nadu and Maharashtra (share of top 10, 20 cities has come back to 25% vs. ~27%, 30%, respectively, pre Covid), (3) RE waiting periods is coming down with higher production levels but supply concerns and commodity spike costs remain, (4) it took 2-3% price hikes in January-February while more are likely in the offing to counteract cost pressures, (5) it added 43 new large format stores and 129 studio stores in Q3FY21 along with 13 exclusive stores...

Domestic auto industry volumes have been on a steady mend in the months post lifting of lockdown restrictions. Manufacturing and distribution activities have been getting ramped up gradually since June 2020, in step with the rest of the economy. However, the impact of the pandemic on the supply chain continues to inhibit a complete return to production normalcy. Nevertheless, most automotive industry segments have reported successive improvement in offtake throughout June-November 2020 (Exhibit 1) on the back of (i) initial bounce provided by pent-up aspect,...

Royal Enfield's (RE) Q2FY21 consolidated revenue was broadly in-line with our and consensus estimates whereas EBITDA/ PAT was ahead of our and consensus estimates on account of lower operating expenses and lower interest cost. We broadly maintain our volume/revenue estimates for FY21E/FY22E and lower our EBITDA/PAT estimates factoring the higher operating expenses in coming quarter due to new product launches, higher depreciation and lower other income. We introduce our FY23 estimates and anticipate revenue/earnings to grow at ~8%/12% CAGR each over FY20-FY23E with EBITDA margin from 19.3%-20.5%. We value RE biz at 23x and 15x for VECV business on...

We expect export opportunities and new launches (Meteor 350) to drive growth over long-term. However, the stock has already factored-in the demand recovery at current price levels. Hence, we reiterate our HOLD...

EIM consol results exceeded our estimates as Revenue/EBITDA/PAT were higher by 4%/22%/10%. This was led by, 1) better margins at RE at 22% (PLe 18.7%, -260bp YoY) and VECV at 6.9% (PLe 5%, +150bp YoY). We expect ~50bp contraction in margins in 2H as higher RM cost will be partially diluted...

Series of model launches to bring in more footfalls RE's new model cycle would attract more customers towards showrooms as it plans to launch new Improvement in margins despite sales decline...

Series of model launches to bring in more footfalls RE's new model cycle would attract more customers towards showrooms as it plans to launch new Improvement in margins despite sales decline...

EIM's 2QFY21 performance has been strong, especially considering it was trailing in terms of volume recovery due to supply-side issues. Despite cost inflation (BS6 & precious metals), gross margins per unit were stable YoY. Strong booking and inquiries, positive initial response to Meteor, and normalized production would support volume recovery going forward. We upgrade FY21/FY22 consol. EPS estimates by 7%/8% as we upgrade volumes and realization for both RE and VECV. Maintain Buy....