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In-line performance

Valuation and View

Eicher Motors (EIM) 3QFY24 consolidated results were in-line as both standalone (S/A) and VECV performance were steady. EBITDA margins of S/A expanded 360bp (-40bp) at 27.5% (in-line), despite Rs200m one-off impact (~50bp) due to product launch and Motoverse event expenses. VECV margins were at 8% (+140bp, +10bp QoQ, est 7%), led by operating leverage. Margins expansion ahead will be gradual ahead as normalization of cost would be partially offset by stable RM and price hike already part of P&L. While demand outlook is positive/weak for domestic/exports, the management sounded confident to improve volume trajectory backed by healthy response to new launches. Further, it has re-iterated slew of launches (rather will be spaced out), which should help expand overall mid-size market.

We expect RE’s overall volumes to grow at ~8% CAGR over FY24-26E (vs -7% CAGR over FY20-22), despite competitive launches. Recent launches could be an inflection point for RE as a completely new and improved platform should drive efficiencies. On the other hand, VECV is approaching a cyclical decline in volumes and profit, in turn restricting consolidated PAT CAGR to 4% over FY24-26E. We cut FY25/FY26 EPS by 3.5%/4.3% to factor in for decline in CV volumes. Stock trades at 24.5x/23x FY25E/FY26E consol EPS. We maintain BUY with SoTP based revised TP of Rs4,631 (v/s Rs4,864). We value S/A business at 28x P/E and VECV at 11x EV/EBITDA.

Result Highlights – RE ASP surprised positively led by favorable mix

? Consol reveunes grew 12.3% YoY (+1.6% QoQ) at Rs41.b (in-line). RE’s volume grew 3% YoY/-0.5% QoQ at 228k while RE ASPs came in better than expected which grew 9.6% YoY (+3.7% QoQ) at Rs177.8k/unit (est Rs171k/unit).

? Consol gross margins were flat QoQ (+420bp QoQ) at 46% (est 46.4%).

? Consol EBITDA grew 27.2% YoY (+0.3% QoQ) at Rs10.6b (est Rs10.6b) with margins at 26.1% (+310bp YoY/-30bp QoQ, in-line). S/A margins expanded 360bp YoY (-40 bp QoQ) at 27.5% (in-line). Leading to EBITDA/vehicle grew by 23.5% YoY (+0.8% QoQ) at Rs47.8k/unit.

? Led by steady operating performance, Adj.PAT came in at Rs9.96b (+34.3% YoY/ -2% QoQ, in-line).

? VECV 3QFY24 performance in-line - Revenues grew 19.1% YoY (+7% QoQ) at Rs54.8b (in-line), EBITDA at Rs4.4b (est Rs3.8b) with margins at 8% (est 7%, +140bp YoY/ +10bp QoQ), Adj.PAT at Rs2.1b (est Rs1.9b, +61.8% YoY/+13.6% QoQ).

? 9MFY24 consol performance – Revenue/EBITDA/PAT grew 15.4%/27.4%/46%.

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