MOSL: EICHER MOTORS (Buy)-Operating performance in line-RE margins stable; VECV below est.
Eicher Motors: Operating performance in line; RE margins stable; VECV below est.
(EIM IN, Mkt Cap USD11.4b, CMP INR27998, TP INR34764, 24% Upside, Buy)
- Consolidated revenue grew 23.7% YoY to ~INR22.7b (est. of INR22.1b), with EBITDA growth of 23% YoY to INR7.1b (est. of INR6.9b). However, higher depreciation and lower other income restricted PAT to INR5.2b (+25% YoY; est. of INR5.5b).
- RE’s net realization improved 2.8% QoQ (+3.9% YoY) to ~INR109.6k (est. of INR106.9). EBITDA margin contracted ~20bp QoQ (flat YoY) to 31.7%, higher than our estimate of 31.2% due to lower RM cost (despite commodity pressures) on efficiency gains. PAT grew 14% YoY to INR4.7b.
- VECV’s realizations grew 2.4% QoQ (flat YoY) to INR1.6m (est. of INR1.57m). EBITDA margin expanded 180bp YoY (-50bp QoQ) to 8.7% (est. of 9.4%), led by efficiency gains and operating leverage. PAT grew 134% YoY to INR1.3b (est. of INR1.4m).
- Earnings call highlights: a) Plan for Phase-II at the Vallam plant would be finalized in May-18; in absence of expansion, capacity to be 900k in FY19. b) Expect strong growth in 7 out of top 10 states, where RE has market share of 2-4%. c) Price increase of 1% taken on 350cc models effective Feb-18. d) Domestic dealership network to be expanded to 825/925 by FY18/FY19. d) Expect strong demand momentum to continue for VECV.
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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