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Stellar topline growth: Eicher continues to post record topline with revenue at Rs 3,986 Cr, up by 17.3% YoY/4.8% QoQ, driven by strong demand across segments in the domestic market while international business was muted due to the macro-economic environment. Amongst segments, Royal Enfield (RE) wholesales were 227,706 units, up by 20.2% YoY and 4.2% QoQ while Volvo Eicher Commercial Vehicles (VECV) volumes were a mixed bag as it were up by 12% YoY and declined by 25.8% sequentially at 19,571 units.

Mixed trend of Realizations: After remaining flat for the last 3 quarters realization grew by 3.8% on sequential basis at Rs 161,211/unit driven by price hikes on the account of BSVI phase 2 norms, however, it remained lower as compared to the same period last year. The mixed trend in realizations was mainly due to higher participation of Hunter series which is relatively a low-cost product, going ahead we anticipate the realizations to improve on the account of better volumes as well as price increase of ~1.5% in Q2FY24 would start reflecting positively in realizations.

Healthy improvement in margins: It posted highest ever EBITDA at Rs 1,021 Cr, up by 22.8% YoY and 9.3% QoQ aided by strong volumes while the benefit of low advertisement cost and freight cost were also factored in. Consequently, its EBITDA margin expanded by 115bps YoY/107bps QoQ to 25.6%; its highest margins in the last 3 years. Going ahead, we expect margins to be in the similar range which will be driven by high volumes in festive season resulting in better operating efficiency.

New launches in pipeline to drive growth further: The management has guided that it has a slew of new launches which will be introduced gradually. The new launches are expected to diversify its portfolio further with less dependency on Classic and Hunter series. Besides, it is also working on developing its EV products which are progressing well in both motorcycle and commercial vehicle segments and shall be ready by FY25.

Outlook and Valuation: Eicher is a leading player in the premium range of motorcycles with a market share of ~33% in 125+cc category. It is expected to witness some pressure from its competitors as they have ventured in the similar segment, however, given its history of competition it has successfully managed to mitigate such pressure and continued to deliver exceptional products and performance. Going ahead, it has a slew of new launches which will be introduced gradually while it also looks to expand its footprint and market share in the international markets. Additionally, it is also in the process of developing EV products which will further aid the growth. Given its strong performance and tailwinds in the industry, we estimate its revenue/EBITDA/PAT to grow at a CAGR of 15.3%/16.9/16.7% over FY23-25E. We maintain Buy with a target price of Rs 4,202, valuing the company at a PE multiple of 29x on FY25E EPS.

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