Shares of Eicher Motors, a leading player in the Indian automobile industry, saw a significant jump of 7.11% to ₹3,647.50 apiece during Friday's intraday trade after the company announced a 49% increase in its consolidated net profit to ₹906 crore for Q4FY23.
The company had reported a net profit of ₹610 crore during the same quarter of the previous fiscal year. Since the first quarter of FY23, the net profit of the company has been consistently growing.
In Q1FY23, it reported a net profit of ₹611 crore, which increased to ₹657 crore in Q2FY23 and further to ₹741 crore in Q3FY23.
The company recorded a 19.13% YoY growth in its revenue from operations, which stood at Rs. 3,804 crore in Q4FY23 as compared to Rs. 3,193 crore in Q4FY22.
It reported a record consolidated operating profit of ₹934 crore in Q4, marking a 23.38% YoY growth from ₹757 crore in the same period last year. While Eicher Motors' operating margin showed a YoY expansion of 100 basis points and a QoQ expansion of 200 basis points, standing at 25% in the March Quarter.
The sales volume of Royal Enfield, the flagship motorcycle brand of the company, increased by 18% YoY to 2,14,685 units in March quarter.
Eicher Motors’ gross profit per vehicle and EBITDA per vehicle improved 11–12% QoQ at ₹75.2k per vehicle and ₹43.2k per vehicle in 4QFY23, led by a higher mix of exports, a better product mix, price hikes, and commodity tailwinds, said domestic brokerage firm Kotak Institutional Equities.
"VE Commercial Vehicles (VECV), a joint venture between Volvo Group and Eicher Motors, reported revenues of ₹5.9 billion, up 42% YoY in 4QFY23 and EBITDA of ₹6.2 billion, an increase of 110% YoY, which came broadly in line with our estimates," said the brokerage firm.
Further, the company recorded a remarkable 73.76% surge in consolidated net profit for the financial year 2022–23, at ₹2,914 crore. While the revenue from operations during 2022–23 stood at ₹14,442 crore, a stellar growth of 40.24% from ₹10,298 crore in FY22,
The company’s premium Royal Enfield reported its highest-ever overall sales in history with 8,34,895 motorcycles sold in the fiscal year ending March 2023. It is a 39 percent increase over the previous year. In the domestic market, Royal Enfield registered sales of 7,34,840 motorcycles which is a 41 percent growth over the previous financial year.
Should you buy the stock after Q4 earnings
After reviewing Q4 performance, Kotak Institutional Equities increased its FY2024–25E standalone EBITDA estimates by 2-3% due to higher ASP assumptions and increased its FY2024–25E standalone EPS estimates by 3-4% on higher other income assumptions.
The brokerage also projects Hunter to deliver 180k and 191k volumes in FY2024E and FY2025E, respectively. However, demand recovery in the domestic market remains below expectations due to affordability issues and muted volume performance in RE's key states, it noted.
“Additionally, an increase in competitive intensity over the next few years needs to be monitored, which may impact RE’s volume and profitability,” it said.
Therefore, the brokerage has given a 'sell' rating on the stock with a revised target price of ₹2,900 apiece, valuing the standalone business based on the DCF methodology. Valuations remain expensive at 27.5X FY2024E standalone EPS estimates, it added.
Motilal Oswal stated that the next growth phase for RE will be driven by improving supply side, new product launches, and a ramp-up in exports. It estimates a 14% volume CAGR for RE over FY23-25E, resulting in monthly run rate increasing to 80–90k for FY24–25E compared to 73.3k in 2HFY23 since Hunter launch.
This coupled with stable commodity prices is expected to support margins and drive earnings CAGR of 30% over FY23-25E, it added.
However, the brokerage has downgraded its rating from 'buy' to 'Neutral' with a target price of ₹3,650 apiece, citing the potential risk from the upcoming launches of Bajaj Triumph in mid-size motorcycles in India and global markets. Valuations at 24.5x and 19.3x reflect the expected volume and margin recovery but not the potential risk, it highlighted.
38 analysts polled by MintGenie on average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
