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Yes Securities Report
Eicher Motors Ltd.'s Q1 FY24 consolidated results were better with ~3%/6% beat to our/street Ebitda leading to margins beat by ~100 basis points/160 bp at 25.6% (+110 bp YoY/ 110 bp QoQ, 12 quarter high).
This was largely due to positive impact of price hike (~150 bp) and cost savings (~80 bp), higher spares sales (Royal Enfield and VE Commercial Vehicles Ltd. at +25% YoY each) offsetting lower exports (-30.5%/-22.5% YoY/QoQ at 9% of volumes versus 12% QoQ).
However, Eicher Motors' margins expansion ahead will be gradual ahead as stable raw material and price hike (+1.5% in 2Q in domestic) would be partially offset by launch expense related to new Bullet 350 in August 2023.
While demand outlook is mixed/weak for domestic/exports, the management sounded confident to navigate increased competitive intensity by playing on Royal Enfield's strength developed over period of past decade.
Further, it has hinted slew of disruptive launches (rather will be spaced out), which should help expand overall mid-size market. We expect Royal Enfield's overall volumes to grow at ~11% CAGR over FY22-25E (versus -7% CAGR over FY20-22), despite new competitive launches.
Recent launches could be an inflection point for Royal Enfield as a completely new and improved platform should drive efficiencies. VECV would continue to see a cyclical recovery in volume and profit, in turn boosting consolidated profit after tax CAGR to 23.3% over FY23-25E.
Stock trades at 24.3 times/21 times FY24E/FY25E consolidated earnings per share.
We maintain 'Buy' with SoTP based revised target price of Rs 4,008 (versus Rs 3,939). We value standalone business at 25 times (~15% discount to 10 year LPA).
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