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MOSL: EICHER MOTORS (Buy)-In-line-Double-digit retail growth during festive season drives upgrades

EICHER MOTORS: In-line; Double-digit retail growth during festive season drives upgrades

(EIM IN, Mkt Cap USD8.3b, CMP INR21701, TP INR24900, 15% Upside, Buy)

• revenues declined ~9% YoY to ~INR21.9b (v/s est. INR21.4b). Higher other income and lower tax helped PAT to remain flat at ~INR5.7b (v/s est. INR4.5b). 1HFY20 revenue/EBITDA/PAT declined 8%/25%/10%.
• Royal Enfield's (RE) net realization grew 2.2% QoQ (+14.5% YoY) to INR131k (v/s est. ~INR129k). EBITDA margin declined 560bp YoY (-90bp QoQ) to 25% (in-line) on higher RM cost (due to adverse mix) and negative operating leverage. PBT declined ~21% YoY, but lower tax led to ~16% growth in PAT to ~INR5.7b (v/s est. ~INR4.8b). For 1HFY20, S/A CFO declined ~17% YoY to ~INR8.3b, impacted by weak operating performance, though there was a reduction in the working capital. Lower capex resulted in ~9% decline in FCFF of ~INR5.6b (v/s ~INR6.1b in 1HFY19).
• VECV's realizations increased ~11% YoY (+4.2% QoQ) to INR1.8m (v/s est. ~INR1.7m). EBITDA margins surprised positively, declining just ~380bp YoY to 5.2% (v/s est. 2.5%). PAT declined ~89% YoY to ~INR150m (v/s est. loss of ~INR239m).