Q2FY20 results
Key positives: Sharp increase in realisations
Key negatives: Higher than expected other expense
Impact on Financials: We raise our FY20/21 estimates by ~5% each to account for a lower tax rate.
Valuation and View
While the transition to BSVI is a challenge for the 2W industry, RE is better placed than its peers (the cost push could be meaningfully lower for RE). Further, we are enthused by RE’s strategic push on the dealership network, the success of new products and the launch of new variants to suit customer needs. We believe that the company’s core strength – its brand equity – remains intact despite the current slowdown. Premium valuations at ~24XFY21 are justified given the underlying brand strength. Maintain Outperformer with a TP of Rs25000 (27XFY21).
Eicher Motors is engaged in the Indian automobile industry. Its 50-50 joint venture with the Volvo group, VE Commercial Vehicles Limited, designs, manufactures and markets reliable, fuel-efficient commercial vehicles of modern technology, engineering components and provides engineering design solutions. Co. manufactures and markets Royal Enfield motorcycles and exports its bikes to over 25 countries including developed countries such as U.S., Japan, U.K. and several European countries. Co.'s business activities fall within a single business segment, automobile products and related components.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
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