8 November 2013
3QCY13 Results Update | Sector:
Automobiles
Eicher Motors
BSE SENSEX
20,666
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Financials & Valuation (INR b)
Y/E DEC
Net Income
EBITDA
Net Profit
Adj. EPS
(INR)
EPS Gr. (%)
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
2013E
69.8
7.0
4.2
142.4
18.5
21.6
22.5
29.0
5.8
2014E
89.2
9.6
5.4
201.6
41.6
870.0
25.4
25.8
20.5
4.7
2015E
110.8
12.5
7.0
260.9
29.4
1072.1
26.9
29.0
15.8
3.8
S&P CNX
6,141
EIM IN
27.0
111.5/1.8
4,249/2,280
4/32/52
CMP: INR4,127
TP: INR4,852
Buy
BV/Sh. (INR) 716.9
Eicher Motors (EIM) reported better-than-expected operational performance
driven by both Royal Enfield (RE) and VECV. Consolidated revenue grew 13.5%
YoY (1% QoQ) to INR16.8b (est. INR15.6b), with EBITDA margin of 9.3% (est.
9.2%). Consolidated EBITDA stood at INR1.57b (est. INR1.43b) driven by better-
than-expected operational performance in both divisions. Adjusted PAT (after
minority) stood at INR857m (est. INR883m) impacted by lower other income
(lumpy in nature).
Earnings call highlights:
1) received extremely positive response to Continental
GT (Café Racer) motorcycle in international markets; India launch expected in
one to two months, 2) Café Racer marks a new beginning in international
markets for RE, 3) savings in RM cost in RE due to product mix and higher
bargaining power with suppliers (due to increasing scale), 4) waiting period
remains high at four to five months, 5) JV with Polaris on track, to launch first
product in CY15, 5) MDEP (Engine) project commenced with over 1,200 engines
exported to Volvo, France, 6) VECV continues to outperform the industry and 7)
launch of new CV range (developed with Volvo inputs) to commence from CY13-
end.
Valuation and view
With several projects coming on stream in CY13-14 and driving 26% sales and
32.8% EBITDA CAGR over CY13E-15E, EIM is at an inflection point. RE continues
to benefit from capacity expansion, product actions and network expansion.
VECV will benefit from MDEP ramp-up and launch of new range of CVs.
We upgrade CY13E/CY14E/CY15E EPS by (2.7)%/12%/7.5% to INR142.4/202/261
respectively. Cut in CY13E EPS is due to lower other income (expected to accrue
in CY14E). EIM trades at 29x/20.5x/15.8x CY13E/CY14E/CY15E EPS.
Buy
with a
two-year target price of INR4,852 (CY15E SOTP).
Jinesh Gandhi
(Jinesh@MotilalOswal.com); +91 22 3982 5416
Chirag Jain
(Chirag.Jain@MotilalOswal.com); +91 22 3982 5418
Investors are advised to refer through disclosures made at the end of the Research Report.