Eicher Motors - Result Analysis Q1 FY21

Eicher Motors - Result Analysis Q1 FY21

CMP: 21,6710768 (As on 14-08-2020)

Revenue from operations 818 Crs 

2,382 Cr (-65.42%) YoY | 2,208 Cr (-62.98%) QoQ 

Year ending revenue: 9,154 Cr Vs. 9,797 Cr (-6.16%)

Net Profit of (55.18) Cr 

451.7 Cr (-112.31%) YoY 304.2 Cr (-118.13%) QoQ 

Year ending Net profit: 1,827 Cr Vs. 2,203 Cr (-17.34%)

EPS (in Rs.) (2.02)

16.55 YoY | 11.14 QoQ 

Year ending EPS: 66.39 Vs. 80.45

View: Result is line with the expectation The last quarter has been challenging for the commercial vehicle industry with almost complete wash out in the first two months of the quarter on account of the pandemic due to YoY revenue and profit significantly corrected. 

Business Updates & Highlights:

EBITDA in Q1FY21 was around INR 3.56 Cr Vs. 614.4 Cr in Q1FY20 Vs. 432.2 Cr in Q4FY20 therefore declined by 99.4% in YoY and 99.1% in QoQ. EBITDA margin in Q1FY21 was around 0.4% Vs. 27.9% in YoY Vs. 19.6% in QoQ. 

Royal Enfield sold 58,383 motorcycles in the quarter, a decline of 68% from 181,966 motorcycles sold over the same period in FY 2019-20.

VECV’s revenue from operations was Rs. 641 crores, down by 72% from Rs. 2,255 crores in the same period last year; EBITDA loss was Rs. 72 crores as against profit of Rs. 137 crs last year in the corresponding quarter. Loss of Rs. 120 crs against profit of Rs. 38 crs last year. VECV registered an 84% decline in sales with 2,129 units as against 13,331 units in the Q1 of last year.

Board of Directors of the Company has fixed August 25, 2020 as the Record date for determining eligibility of members for the purpose of sub-division of each equity share of face value of Rs. 10/- each into ten (10) equity shares of face value of Rs. 1/- each EPS has been computed on the basis of number of new equity shares on the record date. 

Financial

ROE and ROCE is around 20% and 25% respectively and book value per share is around INR 3,655 and share is currently trading at 6x of its book value. Company is currently trading at annualized PE of around 50 (forward PE) which is expensive as per Industry benchmark. Promoter holding in the company is around 49.2% which is good and stable. FIIs and mutual fund hold around 26.9% and 9.3% respectively. 

Position: Share strong support price is INR 20,600/18650. Long term investor based on their risk appetite can continue with the company. 

Share View: Share price high 23,427 (52 week) and now 21,700. Eicher Motors Limited (EML) is the listed parent of Royal Enfield, the global leader in middleweight motorcycles. The world’s oldest motorcycle brand in continuous production, Royal Enfield has made its distinctive motorcycles since 1901., Royal Enfield operates in India, and over 50 countries around the world. Addition to motorcycles, Eicher has a joint venture with Sweden’s AB Volvo - VE Commercial Vehicles Limited (VECV) - which is driving modernization in India's commercial vehicle space, and in other developing countries. VECV has a complete range of trucks and buses from 5-49 tonnes, and its integrated manufacturing plant in Pithampur, Madhya Pradesh is the global hub for medium duty five- and eight-litre engines for Volvo Group.

Opportunities

VECV has signed an agreement for the integration of Volvo Bus India (VBI) business into VECV. This will cover the manufacturing, assembly, distribution, and sales of the Volvo Buses in India, and other rights forming part of the business. Consequently, the bus manufacturing facility at Hosakote, Bengaluru, and all employees of VBI will be transferred to VECV. VBI is currently a division of Volvo Group India Private Limited (VGIPL). VECV has now become the first company in the CV industry to offer 100% connected vehicles to its customers. With the advanced EUTECH6 technology backed up by connectivity. EML is expected to maintain its stronghold in the target sub-segment over the medium term, backed by its strong brand and value proposition, established track record in the Indian market and after-sales service network. The good thing is company is virtually debt free and strong hold by FIIs and mutual fund also. 

Risk

EML’s market share in the overall domestic 2W industry has remained moderate at 4% over the last two to three years, declining to 3.4% in 6M FY2020 because of its segmental concentration in the premium category. In the backdrop of coronavirus pandemic led economic slowdown and resultant impact on the financial performance of the company in FY21. Negligible topline growth for past 5 years. 

Eicher Motors Stock Split: Board of Directors of the Company has fixed August 25, 2020 as the Record date for determining eligibility of members for the purpose of sub-division of each equity share of face value of Rs. 10/- each into ten (10) equity shares of face value of Rs. 1/- each** EPS has been computed on the basis of number of new equity shares on the record date.

Disclaimer: The information provided herein is based on publicly available information and other sources believed to be reliable, but involve uncertainties that could cause actual events to differ materially from those expressed or implied in such statements. The document is given for general and information purpose and is neither an investment advice nor an offer to sell nor a solicitation. While due care has been exercised while preparing this document, we do not warrant the completeness or accuracy of the information. We will not accept any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice.

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