MOSL: EICHER MOTORS-In-line-RE margins stable-VECV significant positive surprise
​Eicher Motors: In-line; RE margins stable; VECV significant positive surprise
(EIM IN, Mkt Cap USD13.4b, CMP INR31520, TP INR35854, 14% Upside, Buy)
- EIM reported in-line 1QFY18 results. Consol. PAT rose 22% YoY to ~INR4.6b (est. of NR4.6b), led by healthy Royal Enfield (RE) performance and positive EBITDA margin at VECV.
- RE EBITDA margin at 31.4%: Net realization rose 2.9% YoY (+2.8% QoQ) to ~INR108.7k (est. of INR108.9). EBITDA margin expanded 60bp YoY (flat QoQ) to 31.4% (est. of 32%), led by higher RM costs. Higher other income at INR1.3b (est. INR1.1b) boosted adj. PAT by 46.6% YoY to INR4.9b (INR4.9b).
- VECV margin contracts 80bp YoY on higher discounts: Realizations grew 17% YoY to INR1.6m (est. of INR1.5m) due to BS-IV-led price hikes. EBITDA margin contracted 80bp YoY (+10bp QoQ) to 8.3% (est. of 6.8%) on account of better realization growth. Adj. PAT was at INR0.65b (est. of INR541m).
- Earnings call highlights: a) Waiting period stable at ~2 months for Classic 350, b) Producible capacity at ~825k for FY18 and ~960k for FY19; can further expand at the third plant; c) No price increase post BS-IV-led hikes; d) MDEP volumes at 7,264 units – growth of ~57.2% YoY (+0.96% QoQ).
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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