MOSL: EICHER MOTORS (Buy)-Margin miss due to cost inflation-expects a recovery in FY20
Eicher Motors: Margin miss due to cost inflation; expects a recovery in FY20
(EIM IN, Mkt Cap USD7.9b, CMP INR20329, TP INR23500, 16% Upside, Buy)
- revenue declined 1% YoY to INR25b. Adj. PAT was down 16% YoY to INR5.4b (in-line). In FY19, revenue/EBITDA/PAT grew 11%/5%/8% YoY.
- RE's net realization improved 5.6% QoQ (+14.4% YoY) to INR127.4k (our estimate: ~INR125.5k). EBITDA margin shrank 450bp YoY (-170bp QoQ) to 27.8% (our estimate: 29.5%) due to regulatory cost inflation and higher marketing cost.
- VECV's realizations increased 6.4% YoY (-8.2% QoQ) to INR1.53m. EBITDA margin came in line at 8.5% (-100bp YoY, +190 QoQ).
- Earnings call highlights: (a) EIM has set a production target of 950k for FY20 (implying ~15% growth on FY19 volumes of ~828k; we estimate volumes of ~848k or ~3% volume growth). (b) There has been a drop in inquiries since Diwali, but the conversion rate is intact. Its key market Kerala has seen some recovery since floods but is yet to fully normalize. (c) EIM added ~90 dealers in FY19 to ~915; targets ~1,000 dealers by end-FY20. (e) The company has 42 exclusive outlets in 19 countries and plans to double it over the next 1.5-2 years. (f) It expects to protect margins around current levels. (g) VECV has entered Indonesia and S. Africa under the 'UD' brand, which would be marketed by Volvo.
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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