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Decent revenue growth: Eicher Motors revenue from operations grew by 12.3% YoY/1.6% QoQ to Rs 4,179 Cr, led by price hikes and premiumization trend amid subdued volume growth of 3.8% YoY to 248,779 units. Its other income was up by 31.9% YoY and share of profits from JV was up by 78.2% YoY which led the profit to improve by 34.4% YoY to Rs 996 Cr, however, it declined by 2% sequentially.

Mixed margin performance: It continues to benefit from benign commodity prices as its gross profit grew by 23.5% YoY/1.4% QoQ to Rs 1,921 Cr with margin of 46% which expanded by 417bps YoY and remained flat sequentially. EBITDA came in at Rs 1,090 Cr, up by 27.2% YoY with a margin of 26.1% which improved by 305bps YoY, however, witnessed slight contraction of 33bps due to higher overhead expenses on the account of promotional events and ad spends towards new launches.

Healthy growth in realizations: Its volume witnessed moderation due to the high base of last year as well as increased competition from peers leading its RE volume to grow by 3% YoY to 228,073 units. Despite subdued volume growth, its Avg realization grew by 9.6% YoY/3.7% QoQ to Rs 177,758/ unit led by price hikes as well as premiumization trend across its portfolio. Given the favorable commodity prices, premium product mix as well as new launches shall continue to aid in the expansion of realization and factoring this, we estimate its realization to grow at a CAGR of 4.8% over FY23-FY26E.

Strong VECV performance: It was a robust quarter for VECV (Volvo Eicher Commercial Vehicle) as its revenue was up by 19.1% YoY/6.9% QoQ to Rs 5,483 Cr, driven by healthy volume across segment which was up by 14% YoY/5.9% QoQ to 20,706 units. Consequently, Avg realization was up by 4.5% YoY/0.9% QoQ to Rs 26.5 Lakh/unit while EBITDA grew by 43.6% YoY/8.4% QoQ to Rs 438 Cr with a margin of 8%. PAT was up by 81.4% YoY/14.1% QoQ to Rs 211 Cr.

Concall & Other key highlights: 1) Parts business revenue for Volvo and Eicher combined was up by 22.3% YoY to Rs 560 Cr. 2) New launches; Himalayan 450 and Shotgun 650 are witnessing good response from customers with healthy bookings. 3) Consistent RE Hunter volume with ~265k since its launch in 2022. 4) The management expects the export market to remain under pressure for the upcoming 2-3 quarters. 5) Heavy Duty Truck and Light Medium Duty Trucks market share stood at 9.6% and 34.5% respectively. 6) VE powertrain sales were up by 8% YoY to 13,596 units. 7) The company aims to launch the new “Sherpa Engine” in the international market which shall aid in volume expansion. 8) The new launches in the upcoming quarters could keep the overhead expenses in the similar range.

Outlook & Valuation: Despite the recent competitive pressure, EML continues to lead the 300+cc segment and has been posting volume growth consistently. The increased buying sentiments in 125cc+ category and new launches in the upcoming quarters is expected to aid the company in terms of volume growth. Further, the rise in government expenditure on electrification of buses and rise in private capex shall aid in volume and revenue expansion in its JV VECV. Factoring this, we estimate its revenue/EBITDA/PAT to grow at a CAGR of 16.3%/19.9%/22.1% over FY23-FY26E and maintain our Buy rating with a revised (upwards) target price of Rs 4,661 valuing it at a PE of 24x on its FY26E EPS.

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