IGI Logo

Valuation and View

Eicher Motors (EIM) 3QFY23 reported consolidated results were in?line at Revenues/PAT while EBITDA was ~4% below our estimates at Rs8.6b (est Rs8.9b) with margins contracting 30bp QoQ at 23% (est 24.2%). This was largely due to ~4% miss in EBITDA of S/A performance as 1) ASP came in lower at Rs162.2k/unit(est Rs166.8k/unit) and 2) S/A gross margins came in lower at 41.7% (est 42.2%) led by product mix and delayed impact
of product price hike (price protection for Hunter). EIM’s margins expansion to be gradual as impact of weaker product mix (increasing contribution from Hunter) to partially offset by 1) price hikes of ~1.5% for Hunter in Nov’22, 2) + operating leverage due to higher volumes and 3) increased share of exports as Hunter has been launched in exportsmarkets. We cut FY24/25 consol EPS by 3%/3.7% to factor in for weaker mix related gross margins contraction and lower ASPs. After witnessing severe headwinds over last 24?30 months, we expect volumes to grow ~21% CAGR over FY22?25E (v/s ?7% CAGR in FY20?22). Recent launches could be an inflection point for RE as a completely new and improved platform could drive a revival. VECV would see a cyclical recovery in volume and profit, in turn boosting consolidated PAT CAGR to 21% over FY23?25E. Stock trades at 23.5x/20.2x FY24E/FY25E consol EPS. We maintain BUY with SoTP based revised TP of Rs3,942 (v/s Rs4,094). We value S/A business at 25x (~15% discount to 10yr LPA). EIM is one of our preferred picks from 2W OEM space.

Result Highlights– Consol in?line; while EBITDA were ~4% below est

* Consol revenues grew 29% YoY (5.7% QoQ) at Rs37.2b. RE’s volume grew 30.6% YoY/ 6.6% QoQ while ASPs declined 3.2% YoY (?0.8% QoQ) at Rs162.2k/unit.
* Consol gross margins contracted 60bp QoQ (+150bp YoY) at 41.8% (est 42.2%). This was due to delayed impact of price hikes (as there was price protection clause on Hunter for ~1.5% price hike under taken in Nov’22).
* Consol EBITDA grew 33.5% YoY (+4.3% QoQ) at Rs8.6b (in?line) with margins at 23.3% (+70bp YoY/ ?30bp QoQ, est 24%). S/A margins expanded 130bp YoY (+20bp QoQ) at 23.9% (in?line).
* Higher other income at Rs 1.92b (+29.4% QoQ, est at Rs1.3b) resulted in Adj. PAT increase at Rs7.4b (+12.8% QoQ, in?line).
* VECV ? 3QFY23 Revenues at Rs46b (v/s Rs36.3b YoY), EBITDA at Rs3.05b with margins of ~6.6% (vs Rs2.4b) and PAT at Rs1.1b v/s Rs660m YoY.
* 9MFY23 revenue/EBITDA/Adj.PAT grew 49.7%/74.9%/84.9%.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632

Above views are of the author and not of the website kindly read disclaimer