Eicher motors results rides confidently into FY23 with highest ever quarterly revenues in Q1FY23

About the Company

Eicher Motors Limited, incorporated in 1982, is the listed company of the Eicher Group in India and a leading player in the Indian automobile industry and the global leader in middleweight motorcycles. Eicher Motors has a joint venture with Sweden’s AB Volvo to create Volvo Eicher Commercial Vehicles Limited (VECV). VECV is engaged in truck and bus operations, auto components business, and technical consulting services business.

It is also the owner of the iconic Royal Enfield brand which is focused on mid-sized motorcycles (250-750 cc). Classic, Bullet, Himalayan are some of the brands that come under its Royal Enfield brand. It is sold in 60+ countries globally. It also provides protective riding apparel, urban casual wear, and Motorcycle accessories.

Its VECV segment makes light & medium-duty trucks, heavy-duty trucks and buses, engineering components, and aggregates. It is also the manufacturer of medium-duty base engines for Euro VI requirements of the Volvo Group. It has launched India’s first BS-VI compliant CV range in FY20.

Manufacturing Facility

It has three manufacturing facilities around Chennai. Its VECV’s manufacturing plant in Pithampur, Madhya Pradesh produces medium-duty five- and eight-litre engines. Its VE PowerTrain plant is the first engine plant in India to produce a Euro-6 compliant base engine A new body shop for Pro 2000 and Pro 8000 trucks has been commissioned and installed.

Its Pithampur Plant has the capacity to produce ~90,000 trucks per annum.Its Phase 1 capacity expansion for the Bhopal plant is 40k vehicles per annum .Its VE PowerTrain plant current capacity is 50,000 engines, scalable up to 100,000 engines.

Key Highlights of Q1FY23 results: Eicher Motors

• The consolidated revenue from operations rose 71.18% YoY to Rs 3,325.80 crore from Rs 1,942.84 crore in EBITDA margin stood at 24.4%.
• Eicher Motors results reported 52% YoY growth in consolidated net profit to Rs 610.66 crore in Q1FY23 as against Rs 237.13 crore in the Q1FY22.
• The Profit Before Tax stood at Rs 09 crore in Q1FY23.
• Two-wheeler division Royal Enfield sold 1,86,032 motorcycles in Q1FY23 , an increase of 52% over 1,22,170 bikes sold in
• Royal Enfield ended the quarter with its best ever performance in the international markets with total dispatches of 28,390 units, an increase of 62% over 17,493 units in
• Siddhartha Lal, MD, Eicher Motors commented on the quarterly result: “Our international volumes continued to record consistent growth with more than 60 % increase as compared to the previous year. We have registered the highest ever quarterly revenues and EBITDA on the back of record international sales volumes,”.

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Consolidated net profit grow 157.52% YoY in Q1FY23

With the highest ever revenue and operating profit for Royal Enfield, driven by a strong demand and new products. The outlook for the company is positive on the back of pent-up demand for bikes, preference for premium bikes, a sharp momentum in export demand, significant improvement in the CV segment, and an improvement in fleet utilisation. Royal Enfield registered a flat volume growth on a QoQ basis aided by pent-up demand, a preference for premiumisation, and higher exports.

Volumes were maintained even in the face of supply-side constraints Despite significant commodity-linked cost pressure, its EBITDA margin expanded 62.9 basis points (QoQ), led by a higher mix of exports in the overall volume, price hikes, and focus on yield improvement.

The performance of VECV , the joint venture with the Volvo Group ,remained in line on a QoQ basis, with volumes declining by 13% and the EBITDA margin contracting by 143.8 bps due to raw material price challenges.

New launches in Royal Enfield major driver for Eicher motors

The management has highlighted that supply-chain constraints, due to the shortage of semiconductor chips, are easing and the situation is expected to improve, going forward.

It mentioned that the demand momentum continues to be strong and the company has a very healthy order book. Inquiry and booking rates for its New Meteor and the New Classic are very encouraging.

There has been a significant growth in exports, and the company continues to focus on expanding its network. It now has 850 outlets, including multi-brand outlets. The management is confident of the export performance going forward. New products will continue to be the key growth drivers and the company has a big number of new products in the pipeline for the current fiscal. The company has just launched Hunter 350 at accessible price points. The launch event saw significant traction and the management expects a strong momentum in demand.

Challenges

Like any other auto manufacturer, the worry for the company is commodity-linked cost pressure. However, operating leverage and cost reduction efforts have been helping the company to arrest the impact of raw material (RM) prices. The management also indicated

that it does not expect RM costs to have a material impact. Post the pandemic, the first quarter has been very encouraging for VECV. Now, with the economy completely opened up, the company believes that demand will continue to improve.

The outlook for the fiscal is promising on the back of an improvement in fleet utilisation, resilience in rural demand, and a revival in mining, construction and highways Aided by the network expansion, the company has expanded its market share across segments and is confident of maintaining it going forward. Moreover, VECV launched its first electric bus that was delivered to the state transport department of the Chandigarh government.

Eicher Motors Share Price: Technical Analysis

The share price of Eicher Motors has been rising for the last two months.The price has been fluctuating between 3000-3200 range and was not able to break the resistance of 3200. The stock shows an upward trend producing higher highs and higher lows.

The stock is currently trading above the 10 and 21 day EMAs indicating bullish behaviour. The RSI indicates a glimpse of overbuying. Overall the technical indicators indicate that, in the long run the stock may continue the uptrend, keeping in mind the impressive quarterly results.

Our View

With the surge in preference for premium bikes and the demand for Heavy EV in national level , Eicher motors promises a sustainable growth in the coming years.The launching of new motorbikes in Royal Enfield will drive the brand and sales in the coming year. Eicher motors is keen to get into contracts with the government and is in a position to cater to the demand of Electric heavy vehicles. With the easing of semiconductor chip shortage there is no panic in this sector, until any current geopolitical issues come in the way. The technical indicators for the stock indicate an uptrend,and the stellar Q1FY23 results could see the share price of Eicher motors move higher over next few months.

 

About the Author

Ketan Sonalkar (SEBI Rgn No INA000011255)

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

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