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EIM RE clocked a resilient 1Q, with revenue up 31.5% led by 24% yoy/5% qoq growth in volumes/ASPs. EBITDA was up 32% yoy and EBITDAM decline was restricted to 90bps as the 290bps gross margin drop was largely offset by lower other opex. The management highlighted strong domestic demand momentum, with enquiries/bookings growing strongly (ahead of deliveries). Owing to the lean channel inventory (10-12 days of dealer inventory + 4-5 days of transit) and capacity ramp-up (now at 1.5mnpa units vs 1.4mnpa at end-FY26; expected to reach 2mnpa in FY28), the management expects growth to continue, even in 2HFY27 despite a high base of 2HFY26. In 1Q, to counter the 4-4.5% impact from commodities + other cost headwinds, EIM RE took a 1.2% price hike in Apr-26 and benefited from higher exports realizations (~1%), currency depreciation (~0.4%), and higher allied revenues (~0.6%). Export demand is robust across key markets, with weaker markets also showing green shoots. It is working on tighter cost controls/value engineering while also focusing on new product launches (a couple of refreshes lined up). Given the robust demand momentum for the 2W industry and EIM RE, we maintain BUY (Upgrade to BUY; demand and margins resilient). FY27E/28E EPS is largely unchanged. We raise TP by 4.6% to Rs9,100 (rolled forward) from Rs8,700 at 30x Jun-28E core EPS.

Strong revenue performance with EBITDAM seeing a limited impact

EIM post revenue of Rs66.3bn (up 32% yoy), largely on account of a healthy 24% yoy volume growth and 5% qoq ASP rise to Rs201k. EBITDA growth was strong at 32% yoy. EBITDAM declined by 90bps qoq to 24.0% due to a 290bps qoq gross margin contraction largely offset by lower other expenses. APAT stood at Rs14.6bn (up 21% yoy).

Earnings call KTAs

1) The management highlighted strong domestic demand momentum, with enquiries and bookings growing strongly ahead of deliveries. Owing to the lean channel inventory (10- 12 days of dealer inventory plus 4-5 days of transit), coupled with the capacity ramp-up (capacity now at 1.5mnpa units vs 1.4mnpa at the end of FY26; expected to reach 2mnpa in FY28), Management expects growth to continue even in 2HFY27, despite the high base of 2HFY26.

2) EIM RE saw a 4-4.5% net impact from commodities and other issues. This was partially offset by a 1.2% contribution from price increases (a 1.75% hike in the 350cc segment), a 1% benefit from the higher share of international business (15.1% of revenue in 1Q vs 13.7% in 4Q), 0.4% from currency depreciation, and 0.6% from allied services (now 15% of revenue), along with some benefit from strategic cost control and value engineering efforts.

3) International business momentum is also strong across key markets, such as Brazil, LatAm, Mexico, and SAARC, while other markets like the USA and APAC are now showing green shoots of improvement.

4) Owing to the ongoing brownfield capacity expansion (a new module of 500 units/day capacity has now kicked in), EIM’s run-rate stands at 5-5.1k units/day versus ~4.5k units in 1Q.

5) To improve channel efficiency, EIM RE is attempting direct billing to dealers which will eliminate depot-related transit delays and increase delivery efficiency.

6) EIM RE has approved a capex of Rs12.3bn for Phase 1 of the new greenfield facility in AP, which will further increase capacity to 2.45mnpa units by FY29-30.

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