For the quarter ended December, Eicher Motors Ltd's consolidated profit after tax (PAT) jumped 62.42% to ₹740.84 crore from ₹456.13 crore in the same period last fiscal, on the back of robust sales.
The consolidated total income for Q3FY23 (October-December) was ₹3,913.32 crore against ₹2,972.79 crore a year ago during the same period.
In comparison to the same time previous fiscal, total expenses were higher at ₹3,006.19 crore, up from ₹2,415.79 crore.
As per the company's exchange filing from Tuesday, its joint venture for commercial vehicles, Volvo Eicher Commercial Vehicle (VECV), posted its highest third quarter sales ever with 18,162 units, an increase of 13.2% over the same period last year.
In a similar manner, Royal Enfield's two-wheeler division reported total dispatches of 2,19,898 motorcycles, an increase of 31.15% over 1,67,664 during the same period previous year.
According to Siddhartha Lal, managing director of Eicher Motors, Royal Enfield's new products Super Meteor 650 and Hunter 350 have garnered positive reviews all around the world.
Brokerage Motilal Oswal Financial Services Ltd in its report said that the demand for Royal Enfield has surpassed pre-COVID levels and is expected to further improve going forward on the back of launches and ongoing expansions in the international market.
The company continues to expand its addressable market through distribution expansion, price laddering, new product launches, and mass personalisation through the ‘Make it Yours’ (MIY) platform.
All of Royal Enfield's recent product debuts, including the Himalayan, 650cc twins, Meteor, and Classic 350, have been well received, with a positive response for the Hunter. The releases will significantly increase its addressable market globally, broaden its product selection, and narrow the quality gap versus the 650cc twins.
"This coupled with easing supply side issues should result in a nearly 14% volume compound annual growth rate (CAGR) (FY23E-25E), which will drive a 160bp standalone margin recovery to 25.7% by FY25E and a nearly 25% standalone PAT CAGR," said the brokerage.
While the brokerage largely maintains its FY23E earnings per share (EPS), it cut FY24E EPS by 11% to factor in lower-than expected volume growth and Hunter’s influence on volumes, average selling prices (ASPs) and margins.
"However, we believe improving supply, new product launches and a ramp-up in exports will drive the next phase of growth for Royal Enfield. This coupled with stable commodity prices will support margins and drive earnings growth. We maintain 'buy' rating with target price of ₹3,625," added the brokerage.
Brokerage Nirmal Bang Institutional Equities Research expects exports to clock 12% CAGR over FY22-FY25E, aided by entry into new markets and market share gain in the existing markets.
In the domestic motorcycle market, the company recorded an all-time high market share of 8.1%, driven mostly by increased volume from new releases. Additionally, prioritising exports, the company has greatly increased its market share across a number of export markets.
"We expect exports to be one of the key growth drivers for Eicher over the medium term. Furthermore, we also expect VECV to benefit from the commercial vehicle (CV) upcycle. We remain positive on Eicher’s business prospects, owing to healthy growth and model launches," said the brokerage in its report.
The brokerage has upgraded the stock and recommended 'buy' from earlier 'accumulate'.
JM Financial Institutional Securities Ltd forecasts that the company's overall demand momentum would continue as a result of its growing distribution network and increasing market share in foreign markets. Supply issues have mostly subsided. In order to counteract inflationary pressure during the third quarter, the corporation raised prices. The recent easing of raw material inflation is expected to leave margin pressure mostly behind.
"With the improvement in underlying demand sentiment and product interventions, we believe the company is back on the growth trajectory. Cost control initiatives and positive operating leverage is expected to support margin performance. We maintain 'buy' rating with a target price of ₹4,100," said the brokerage in its report.
Brokerage Nuvama Wealth Management Ltd said that the company's Q3FY22 earnings before interest, taxes, depreciation, and amortisation (EBIDTA) of ₹8,600 crore fell short of its forecast by over 6% due to lower-than-expected gross margins as the company decided to uphold the price commitment despite commodity inflation.
As per the report, the management has indicated that it will continue its price commitment philosophy for waitlisted customers. However, given waning commodity pressure, the brokerage expects the impact to be minimal.
"However, we lower our FY24E EPS by ~8% to factor in weaker demand in domestic as well as international market. Also, we are factoring in some slowdown in VECV business. We maintain ‘hold’ with a target price of ₹3,579," said the brokerage.
