MOSL: EICHER MOTORS (Buy)-Op. performance in line; strong margins in both RE and VECV
Eicher Motors: Op. performance in line; strong margins in both RE and VECV
(EIM IN, Mkt Cap USD10.9b, CMP INR27484, TP INR34111, 24% Upside, Buy)
- revenue grew 27% YoY to ~INR25.5b (in-line), with EBITDA growth of 30% YoY to INR8.1 (in-line). However, low other income and high tax led to adj. PAT of INR5.8b (+22% YoY) missing our estimate of INR6.2b.
- RE's net realization improved ~1.3% QoQ (+3.9% YoY) to INR112.9k (est. of INR111.7k), led by a favourable mix and price hike taken in Feb-18. EBITDA margin expanded 90bp YoY (flat QoQ) to 32.3% (est. of 31.7%) due to operating leverage and cost-control benefits, which offset commodity cost pressures. Adj. PAT increased ~20% YoY to INR5.9b (est. of INR5.7b).
- VECV's realizations grew 12% QoQ (+3% YoY) to INR1.6m (est. of INR1.48m) due to a better mix and a 1.5% price hike in 1QFY19. EBITDA margin expanded 90bp YoY (-30bp QoQ) to 9.2% (est. 8%), led by price hikes, efficiency gains and operating leverage. PAT grew 76% YoY to INR1.1b (est. of ~INR0.9b).
- Earnings call highlights: (a) Supply is now aligning with demand, with waiting period of <1 month. Higher-priced variants form ~50% of bookings. (b) SSG (for >2 year old dealer) at 10%. (c) Maintains production guidance of 950k for FY19. (d) Capacity expansion at Vallam plant to come by 2HCY19. (e) Plans to expand network to ~950 by Mar-19 from ~848 as of Jun-18. (f) Bookings for 650cc twins to begin from Nov-18. (g) It sees opportunity to optimize material cost, though easier avenues have been captured.
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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