Kotak expects consolidated adjusted net profit to decline 19 percent YoY led by weak performance of both Royal Enfield and VECV
Royal Enfield maker Eicher Motors is likely to disappoint street on May 10 with their March quarter earnings due to subdued volumes across segments.
The company will announce its numbers on May 10.
Profit in Q4 is expected to fall in the range of 10-20 percent compared to the same period last year and revenue degrowth could be around 3-6 percent YoY as Royal Enfield sales volumes have fallen nearly 14 percent.
"Consolidated revenue would decline 2.7 percent YoY (+5.1 percent QoQ). Adjusted PAT is estimated to decline 16.3 percent YoY (+1.9 percent QoQ)," Motilal Oswal said.
Kotak expects consolidated adjusted net profit to decline 19 percent YoY led by weak performance of both Royal Enfield and VECV.
Prabhudas Lilladher and Kotak expect Eicher to report consolidated revenue dip of around 5 percent YoY and 4.5 percent YoY, respectively.
Royal Enfield's Q4FY19 volumes have fallen yet again, down a sharp 13.6 percent YoY (up 1 percent QoQ) to 1,96,000 units due to weak demand and high ownership costs, while VECV volumes were lower 9 percent YoY (up 24 percent QoQ) to 21,000 units.
At the operating level, brokerages expect a sharp decline in EBITDA and margin contraction.
Kotak expects EBITDA to fall 12 percent YoY. "Consolidated EBITDA margin may fall 255 bps YoY and margin of Royal Enfield is likely to decline 280 bps YoY due to negative operating leverage," it said.
"We expect EBITDA margin to slip to 29.5 percent, lower 200bps YoY (lower operating leverage)/ higher 50bps QoQ (commodity pressures easing sequentially, better product mix)," Prabhudas Lilladher said.
Due to subdued volume growth, Motilal Oswal lowered its volume estimates for Royal Enfield for FY20/21 by 9/7.4 percent to 8,40,000/9,13,500.
Key issues to watch out for would be outlook on Royal Enfield demand from metros, tier 1 and tier 2 cities, order book trend, and inventory levels for Royal Enfield.
