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EIM reported a ~3% beat on Consensus EBITDA, owing to higher ASPs (up ~4% QoQ on better mix), with margin flat QoQ at 26.5%. EIM expects the middleweight segment (Royal Enfield, i.e. the RE core market) to grow a in high single digit in FY25 (vs double-digits earlier); it has planned multiple product interventions (following the recent Guerrilla 450) as well as marketing efforts (esp. in Hunter) to revive growth. Per our checks, Guerrilla has received lukewarm response so far; we maintain our belief that RE faces structural growth challenges (refer to our note), with recovery seen as being gradual despite the competitive cycle now largely behind. This reflects in our muted 6%/9% CAGR for RE volume/consol. EPS over FY24-27E. We retain our SELL rating with unchanged TP of Rs3,750/sh at 22x core Jun-26E PER + VECV stake.

Higher ASPs drive the EBITDA beat in Q1

Revenue grew 10% YoY to Rs44bn, slightly above estimates; RE volume was flat YoY at ~226K units; realization rose 4% QoQ to Rs194K/unit on better mix (higher share of over 350cc and exports). EBITDA margins were flat QoQ at 26.5% (~3% beat). Adjusted PAT rose 20% YoY to Rs11bn (~8% beat), driven by higher than expected EBITDA and higher share of profits from VECV (partly due to shift to lower tax rate).

Earnings Call KTAs

1) EIM expects the middleweight motorcycle category to grow in a high single digit this year; confusion in customer minds—with the entry of competition last year—is gradually clearing; the premiumization story remains intact. 2) RE’s retail growth has been ahead of the market; it is seeing improvement in enquiries, walk-ins, and conversions; RE has shifted to the ‘auto replenishment’ model which has led to impact on wholesales recently; dealer inventory has been maintained at 2-3 weeks. 3) The company has several launches planned in coming times, incl. in Classic; it has also planned various activities for creating excitement around models like Hunter and Meteor, in terms of product intervention and marketing activities; Hunter has successfully drawn young and firsttime buyers into its RE fold (first-time buyer contribution at 19-25% vs 12-13% for the overall portfolio), and the company is looking to further build on this. 4) RE is cognizant of its need to improve salience in rural markets, and in segments like college students in urban markets. 5) In case of Bullet too, some product intervention before the festive period is expected. 6) EIM has shipped ~6K units of the recently-launched Guerrilla. 7) Sentiment in international markets is not yet up to expectations; however, in retail terms, EIM has seen YoY growth in Q1; RE’s market share is in a high single digit and it is among the top-4 in the middleweight category in several markets, like the UK, Italy, Thailand, etc. 8) There is some pressure in aluminium prices, but VA/VE initiatives are seen helping; EIM would see some increase in marketing spends going forward.

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