Eicher Motors rating – Buy: Performance in line with estimates

EPS by 7%, accounting for the COVID impression on volumes and commodity inflation, whereas sustaining FY23e earnings estimates. Keep Purchase, with TP of Rs 3,200 (Mar’23 SOTP).

Eicher Motors (EIM)’s Q4FY21 efficiency was in line, supported by good quantity restoration in each RE and VECV. Regardless of price inflation, Ebitda margins per unit have been steady q-o-q. Good response to Meteor, upcoming launches of the brand new Basic, and normalised manufacturing would assist RE quantity restoration going ahead. VECV can be firmly on the restoration path.

We reduce FY22e consol. EPS by 7%, accounting for the COVID impression on volumes and commodity inflation, whereas sustaining FY23e earnings estimates. Keep Purchase, with TP of Rs 3,200 (Mar’23 SOTP).

RE’s Ebitda/unit steady regardless of price pressures; VECV misses estimates
Consol. revenues/Ebitda/PAT grew 33/58/ 85% y-o-y to ~Rs 29.4/ 6.8/5.6 bn. FY21 consol. revenues/Ebitda/PAT declined 5/16/24% y-o-y. RE’s Q4FY21 realisations grew 6.7% y-o-y (+1.7% q-o-q) to Rs 142.8k (v/s est Rs 146k), pushed by value hikes (~9% hike in FY21 and three–8% throughout fashions since Jan’21) and a greater combine. S/A revenues grew 34% y-o-y to Rs 29.2 bn. S/A gross margins declined 322bp y-o-y to 40.3%. S/A adj. Ebitda grew 47.5% y-o-y to Rs 6.7 bn. Adj. Ebitda margins grew 210bp y-o-y (-60bp q-o-q) to 22.9%. Ebitda per unit grew 17% y-o-y on low base, however was steady q-o-q at Rs 32.7k (v/s Rs 33k in Q3FY21).
VECV realisations grew 10% y-o-y (-5% q-o-q) to Rs 1.99m. Ebitda margins have been 8.9% (+710bps y-o-y, +30bps q-o-q). PAT stood at Rs 1.26 bn (v/s est Rs 1.73 bn).

Highlights from commentary
RE demand stays sturdy on the again of a powerful order ebook, anticipated pent-up demand, and a surge in export numbers. It has 2–3 months of order backlog, which might be catered to as soon as the lockdowns are lifted. It expects to realize 80k items/month in H2FY22. Royal Enfield has a really thrilling pipeline of recent merchandise, with FY22 having the very best ever variety of mannequin launches. Royal Enfield has diminished its rhodium consumption by 66%; nevertheless, the advantage of this is able to be mirrored within the coming quarters. Royal Enfield added a complete of 535 shops, together with most important shops (>100 shops) and studio shops (>430 shops), in FY21, taking the overall variety of shops to 2,056 throughout 1,750 cities (from 1,200 cities). Community enlargement in India is essentially full, besides in a single state.

Valuation and consider
We imagine the not too long ago launched Meteor and upcoming merchandise would assist broaden addressable markets and drive the following section of development for RE. The inventory trades at 28.9x/21.6x FY22e/FY23e consol. EPS. Keep Purchase.