MOSL: EICHER MOTORS (Buy)-Reasonable show in a testing quarter-five-year product pipeline in place
Eicher Motors: Reasonable show in a testing quarter; five-year product pipeline in place
(EIM IN, Mkt Cap USD7.9b, CMP INR20675, TP INR23960, 16% Upside, Buy)
- revenue grew 3% YoY to INR23b. Adj. PAT increased 0.4% YoY (-5.9% QoQ) to INR5.3b. EBITDA margin shrank 220bp YoY (-130bp QoQ) to 29%. For 9MFY19, revenue/EBITDA/PAT grew 13.5%/10.3%/9.4% YoY.
- RE's net realization improved 5.4% QoQ (+10.1% YoY) to INR121k, led by a favorable mix and a price increase for ABS/ disc brakes. EBITDA margin contracted 220bp YoY (-110bp QoQ) to 29.5% due to the launch expense related to 650cc Twins, negative operating leverage and RM inflation. Adj. PAT increased 6% YoY to INR5b.
- VECV's realizations grew 4.9% QoQ (+4.3% YoY) to INR1.66m. EBITDA margin shrank 210bp YoY (-240bp QoQ) to 6.6%, led by higher discounts and a weak mix. PAT grew 43% YoY (-46.5% QoQ) to INR760m.
- Earnings call highlights: (a) 650cc Twins has a waiting period of ~6 months, with production to scale-up to 4.5-5k/month by Apr-May'18 (from ~2k/month in Jan-19). (b) Production guidance of 870k-880k for FY19. (c) RE's dealer inventory under two weeks. (d) Kerala market is yet to make a comeback post floods, with a loss of few thousands per month. (e) It has a product pipeline in place for five years. (f) Took price hike of ~INR1,400 in Jan'19 to pass through cost inflation. (g) 80% of portfolio shifted to ABS.
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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