MOSL: EICHER MOTORS (Buy) - Higher tax dents consol. PAT - RE margins in-line - VECV below est.

EICHER MOTORS: Higher tax dents consol. PAT; RE margins in-line; VECV below est.

(EIM IN, Mkt Cap USD12.5b, CMP INR30305, TP INR34714, 24% Upside, Buy)

• revenue grew 33.9% YoY to ~INR25.3b (est. of INR24.8b), with EBITDA growth of 36% YoY to INR8b (est. of INR8.2b). Exceptional item pertains to a loss from discontinuing operations (Eicher Polaris) of INR1.9b. Higher tax resulted in below-estimated adj. PAT of INR6.5b (+39% YoY).
• RE's net realization improved 4.9% QoQ (+8.7% YoY) to ~INR115k (est. of INR113.3k). EBITDA margin expanded ~60bp QoQ (90bp YoY) to 32.3% (est. of 32%) due to operating leverage. Adj. PAT was flat YoY at INR4.1b (est. of INR5.2b).
• VECV's realizations declined 10% QoQ (-3% YoY) to INR1.4m (est. of INR1.6m). EBITDA margin expanded 80bp QoQ (+130bp YoY) to 9.5% (est. of 9.9%), led by efficiency gains and operating leverage. PAT grew 51% YoY to INR1.8b (est. of INR2b).
• In FY18, EIM's revenue grew 27% to INR89.2b, with EBITDA margin expanding ~50bp to 31.5%. PAT grew 30% to INR21.6b.
• Earnings call highlights: a) Producible capacity to be 950k in FY19. b) SSG for RE is currently in low-double-digits, with the waiting period for newly launched models at 1.5 months. c) Demand in Maharashtra and Karnataka was strong in 4Q after weakness in the last two quarters. d) Domestic dealership network to be expanded to 925 by FY19, while 25-30 new exclusive stores would be opened overseas in the next two years. e) Expect market share gains for VECV led by Pro-series trucks.