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Highlights from the Quarter (Q4FY21):

For Q4FY21, Eicher Motors’ total revenue from operations stood at Rs. 2,940 Cr (an all time high for the company) as compared to Rs. 2,208 Cr in the corresponding quarter last year (up 33.2% YoY) and compared to Rs. 2,828 Cr (up 4.0% QoQ). EBITDA for the quarter was Rs. 634 Cr, up 46.8% compared to Rs. 432 Cr in the same period last year. This was despite increase in cost of materials consumed, improvement in EBITDA was on account of cost control measures introduced throughout the year which saw reduction in other expenses.

EBITDA margin for the quarter was 21.58%, down 219 Bps on QoQ basis due to increase in cost of input metals. Net Income for the quarter stood at Rs. 526 Cr, up 72.9% from Rs. 304 Cr for the same quarter last year. This was mainly due to the good performance of VECV, which led to a share of profits from JV at Rs. 69 Cr. The company sold 203,343 motorcycles during the quarter, an increase of 25% from 163,083 motorcycles sold during the same quarter last year.

For the quarter, VECV’s revenue from operations was Rs. 3,602 Cr, up 71.4% from Rs. 2,101 Cr during the corresponding period last year. EBITDA was Rs. 320 Cr, significantly higher than Rs. 37 Cr during the same quarter last year. Through various measures, the division was able to improve revenues as well as reduce costs resulting in an EBITDA margin of 8.9%, up from 1.8% during Q4FY20. Net Income for the quarter stood at Rs. 127 Cr against loss of Rs. 26 Cr for Q4FY20. the sales volumes saw a growth of 56% YoY during the quarter with volumes of 18,167 units in Q4FY21 vs. 11,629 units in Q4FY20.

For the full year, Eicher’s revenue declined 5% to Rs. 8,720 Cr compared to Rs. 9,154 Cr during FY20. EBITDA was Rs. 1,781 Cr, down by 18% compared to Rs. 2,180 Cr and Net Income was recorded at Rs. 1,347 Cr, down 26% compared to Rs. 1,827 Cr for the same period last year. During the year, Royal Enfield sold 609,403 motorcycles, down 13% YoY. During the year the company added 535 dealerships and studio stores taking the retail presence to 2,056 retail touch points across more than 1,750 cities. The international footprint has also increased to more than 130 exclusive stores and a retail footprint of over 760 stores in more than 60 countries.

OUTLOOK AND VALUATION

The company’s performance after the 1 st Covid-19 induced lockdown was strong, with the premiumization theme playing out as anticipated. Therefore, despite losing out on almost a month’s sales at the beginning of the year, the volumes recovered well. In addition to the motorcycle volumes, the trucks business picked up after the transition to BSVI was completed. The company launched its Meteor motorcycle during the second half, which was very well received by the market. During the year, the company has faced various challenges as its supply chain hasn’t been able to meet the growing demand leading to a long waiting period for the customers. The margins have also been under pressure as prices of input metals, especially precious metals have increased over the last few months.

The company has innovated their processes to reduce the content of precious metals in their motorcycles and the effects of this will be seen going forward. The pipeline of new product launches is on track as indicated by the management. Some delay in launch schedules could happen given the supply chain is experiencing difficulties. With the second wave of Covid-19 currently going on, many dealerships are closed and we anticipate Q1FY22E performance to get impacted, however the management is confident that once the lockdowns are eased, the demand for personal mobility will still be high.

The company’s performance was in line with our estimates for the quarter and the full year. We maintain our forecasts for FY22E and FY23E. We expect a Net Profit of Rs. 3,874 Cr for FY23E, translating to a Net margin of 24.2%. We expect FY23E EPS at Rs. 142. We maintain our assigned PE multiple of 24x and maintain our target price of Rs. 3,408, showcasing an upside of 29% over an investment horizon of 18-24 months. We maintain BUY on Eicher Motors.

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