5 May 2017
4QFY17 Results Update | Sector: Automobiles
Eicher Motors
Buy
BSE SENSEX
29,859
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
S&P CNX
9,285
EIM IN
In-line; RE margin stable, VECV performance a big positive surprise
27
EIM reported in-line 4QFY17 results. Consol. PAT grew by ~34% YoY to
701.7 / 10.5
~INR4.59b (est. of ~INR4.63b) in 4Q and by 56% YoY to ~INR16.7b in FY17.
26700 / 18006
The company declared a dividend of ~INR100/share for FY17 (similar to
2/-2/13
1257
FY16, which, however, was a 15-month period).
49.4
Royal Enfield (RE) EBITDA margin at 31.8%:
Net realization increased 1.5%
CMP: INR25,837
TP: INR30,402(+18%)
Financials & Valuations (INR b)
Y/E Mar
2017
2018E
Net Sales
70.0
91.1
EBITDA
21.7
29.7
PAT
18.0
24.2
EPS (INR)
661.3
892.0
Gr. (%)
34.2
34.9
BV/Sh (INR)
1,816.5 2,532.0
RoE (%)
42.8
41.0
RoCE (%)
29.1
30.7
P/E (x)
39.1
29.0
P/BV (x)
14.2
10.2
2019E
109.0
36.4
30.8
1,135.1
27.3
3,463.8
37.9
30.1
22.8
7.5
Estimate change
TP change
Rating change
YoY (flat QoQ) to ~INR105.7k (est. of ~INR106.1k). EBITDA margin expanded
~180bp YoY (-40bp QoQ) to 31.4% (est. of ~32%), led by higher other
expenses. Further, lower other income restricted adj. PAT growth to 8.5%
YoY (to INR4.1b v/s est. of ~INR5.5b). FY17 PAT grew 49% YoY to INR15.6b.
VECV’s margin expands on positive operating leverage:
Realization
increased ~11% YoY to ~INR1.48m (est. of ~INR1.5m) due to price hikes and
an improved product mix. EBITDA margin expanded 370bp YoY (+130bp
QoQ) to 8.2% (est. of 6.4%) led by positive operating leverage. Adj. PAT was
~INR1.16b (est. of ~INR674m). FY17 PAT grew ~12% YoY to ~INR3.4b.
Earnings call highlights:
a) Waiting period stable at ~2 months for Classic
350. b) Order booking in Top-20 cities (~50% of volumes) growing at over
15%. c) Added ~150 dealerships in FY17 to ~675; would be adding ~150
dealers/year in next two years; d) Producible capacity at ~825k for FY18 and
~960k for FY19, can further expand at third plant; e) Price increase of ~3% in
RE in 4QFY17; f) MDEP volumes at 7,217 units (+21% YoY, +23% QoQ).
Valuation and view:
We upgrade consol. EPS for FY18E/19E by 4%/8% to
factor in better-than-estimated VECV performance. EIM trades at 29x/22.8x
FY18E/19E EPS. Maintain
Buy
with a TP of INR30,402 (FY19 SOTP-based).
Quarterly Performance (Consolidated)
Y/E March
Net Operating income
Growth (%)
EBITDA
Recurring PAT
Growth (%)
Standalone (RE)
Royal Enfield (units)
Growth (%)
Net Realn (INR/unit)
Change - YoY (%)
EBITDA Margins (%)
Recurring PAT
Growth (%)
VECV
Total CV Volumes
Growth (%)
Net Realn (INR '000/unit)
Change - YoY (%)
EBITDA Margins (%)
Recurring PAT
Growth (%)
1Q
25,680
33.5
3,660
1,953
40.3
FY16 (15m)
FY17
FY16
FY17 FY17E
2Q
3Q
4Q
5Q
1Q
2Q
3Q
4Q (15m)
4QE VAR (%)
10,959 12,997 12,843 15,322 15,557 17,549 18,348 18,881 61,735 70,334 18,992
-1
-51.2
-42.9
-44.0
-40.3
42.0
35.0
42.9
23.2
NA
42.4
24.0
2,857 3,507 3,577 4,468 4,700 5,422 5,770 5,848 16,891 21,740 6,312
-7
2,372 2,846 2,787 3,431 3,763 4,132 4,182 4,594 13,380 16,671 4,638
-0.9
50.7
72.4
81.3
75.7
58.6
45.2
50.0
33.9
74.0
55.7
28.9
92,021 106,613 127,611 125,744 148,186 147,483 166,941 173,838 178,228 600,175 666,490 178,228
44.4
43.8
55.7
52.9
61.0
38.3
30.8
38.2
20.3
58.7
38.8
20.3
104,450 102,791 101,852 102,139 104,140 105,603 105,576 105,477 105,731 103,073 105,598 106,100
4.7
2.1
1.7
1.4
-0.3
2.7
3.7
3.3
1.5
2.9
2.4
1.8
26.1
26.1
27.2
28.3
29.6
30.8
31.3
31.8
31.4
27.6
31.3
32.0
2,135 1,988 2,569 2,524 3,792 3,371 3,962 4,152 4,116 13,100 15,600 5,467
32.9
49.2
82.2 103.4
77.7
69.6
54.2
64.5
8.5 288.7
48.9
37.5
11,020 12,128 11,657 12,687 15,553 16,071 13,408 11,784 17,230 63,045 58,493 17,230
10.4
6.3
20.8
30.1
41.1
32.5
15.0
-7.1
10.8
23.7
16.0
10.8
1,458.1 1,472.0 1,529.1 1,569.3 1,333.5 1,331.3 1,470.5 1,599.6 1,482.3 1,526.5 1,461.5 1,497.8
13.0
12.0
1.5
4.4
-8.5
-9.6
-3.8
1.9
11.2
8.1
-4.3
4.9
7.1
8.2
8.0
8.5
4.5
9.1
7.2
6.9
8.2
7.9
7.9
6.4
436
768
677
890
60 1,082
698
570 1,160 3,817 3,428
674
20.0
69.5
50.3
56.4
-86.1
40.9
3.1
-36.0 1,820.6
-40.6
12.3
-18.7
0
-14
-70bp
-24.7
0.0
-1.0
180bp
72.0
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Jinesh Gandhi
(Jinesh@MotilalOswal.com); +91 22 6129 1524
Deep Shah
(Deep.S@MotilalOswal.com);
Jigar Shah
(Jigar.Shah@MotilalOswal.com)