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In-line performance

Valuation and View

Eicher Motors (EIM) 4QFY24 consolidated results were in-line as both standalone (S/A) and VECV performance were steady. EBITDA margins of S/A expanded 290bp (flat QoQ) at 27.6% (est 27.6%) led by record ASP at Rs184k/unit due to higher exports share in volumes and benign RM. VECV margins were at 7.8% (flat QoQ, est 8%). Margins expansion ahead will be guided by stable RM, higher share of non-motorcycle and exports. The demand outlook is positive for domestic as middle weight motorcycles segment growth guided at double digit in FY25E while exports to see gradual volume improvement. The management sounded confident to improve RE’s volume trajectory backed by healthy response to new launches (Himalayan 450). 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 ~10% CAGR over FY24-26E, despite competitive launches. Recent launches could be an inflection point for RE as a completely new and improved platform should drive efficiencies. However, we remain watchful of domestic average monthly run-rate as exports recovery to be only gradual. On the other hand, VECV is approaching a cyclical decline in volumes, in turn restricting consolidated revenue/EBITDA/Adj.PAT CAGR to 11%/14%/10% over FY24-26E. We raise FY25/FY26 EPS by 6% each as we raise RE volumes by ~2-3%. Stock trades at 28x/26.2x FY25E/FY26E consol EPS. We maintain BUY with SoTP based revised TP of Rs5,383 (vs Rs4,677 earlier). We value S/A business at 30x P/E (vs 28x) and VECV at 11x EV/EBITDA

Result Highlights – Overall performance steady

* Consol reveunes grew 11.9% YoY (+1.8% QoQ) at Rs42.6b (in-line). RE’s volume grew 4.2% YoY/ -0.2% QoQ at 228k while ASPs came in line at Rs184.1k/unit (+5% YoY, +3.6% QoQ), highest led by higher exports share as pricing were stable.

* Consol gross margins expanded 220bp YoY (+50bp QoQ) at 46.5% (est 45.7%). Consol EBITDA grew 20.9% YoY (+3.5% QoQ) at Rs11.3b (in-line) with margins at 26.5% (+200bp YoY/ +40bp QoQ, est 26.4%). S/A margins expanded 290bp YoY (flat QoQ) at 27.6% (est 27.3%), leading to highest EBITDA/vehicle at Rs50.7k/unit which grew by ~17% YoY (+3.8% QoQ).

* Higher depreciation at Rs1.65b (est Rs1.5b, +12% each YoY/QoQ) was offset by higher other income at Rs3.05b (est Rs2.6b, +20.3% QoQ) leading to Adj.PAT came in-line at Rs10.7b (+18.2% YoY/ +7.5% QoQ, est ~Rs11b).

* VECV 4QFY24 performance - Revenues grew 1.2% YoY (+14% QoQ) at Rs62.8b (in-line), EBITDA at Rs4.9b (est Rs5.1b) with margins at 7.8% (est 8%, -220bp YoY/ -20bp QoQ), Adj.PAT at Rs2.42b (est Rs2.5b).

* FY24 consol performance – Revenue/EBITDA/PAT grew 14.5%/25.7%/37.3%.

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