MOSL: EICHER MOTORS (Buy)-In-line-margin miss attributable to launch expense
Eicher Motors: In-line; margin miss attributable to launch expense, negative op. leverage
(EIM IN, Mkt Cap USD8.2b, CMP INR21977, TP INR26351, 20% Upside, Buy)
- revenue grew 11% YoY to INR24b (in-line). Adj. PAT grew 7% YoY (-1.7% QoQ) to INR5.6b (est. of INR5.8b). In 1HFY19, revenue/EBITDA/PAT grew 19%/18%/14%, implying residual growth of 12%/15%/14% for 2H.
- RE’s net realization improved 1.3% QoQ (+7.3% YoY) to INR114.4k (est. of INR113.2k), led by favourable mix. EBITDA margin shrank 130bp YoY (-170bp QoQ) to 30.6% (est. of 31.1%) due to launch expense (650cc twins) and negative operating leverage. Adj. PAT rose 1.3% YoY to INR4.9b.
- VECV’s realizations fell 0.7% QoQ (+2% YoY) to INR1.58m (est. of INR1.55m) due to product mix impact. EBITDA margin shrank 20bp YoY/QoQ to 9% (est. of 9.6%). PAT grew 50% YoY (+20% QoQ) to INR1.4b (in-line).
- Earnings call highlights: (a) Order book has shrunk, with blended waiting period of 2-3 weeks. SSG (incl. Maharashtra, Karnataka and Kerala) declined in single-digits in 2QFY19. However, demand was good in festival season (Oct-18). (b) RE focuses on diluting impact of price increase (up to 18% increase, incl. ABS) by increasing financing. (c) Finance penetration in Oct-18 at over ~50% of volumes (v/s 1HFY19 at 45-46% and ~33% two years back). (d) For 650cc twins, India is expected to be the biggest market; it is targeting existing RE owners. (e) Strike at Oragadam continues – EIM not willing to negotiate with external party. Net production loss is ~800/day.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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