Checkout Budget Highlights 2023YES Securities' research report on Eicher Motors
Eicher Motors (EIM) 3QFY23 reported consolidated results were in‐line at Revenues/PAT while EBITDA was ~4% below our estimates at Rs8.6b (est Rs8.9b) with margins contracting 30bp QoQ at 23% (est 24.2%). This was largely due to ~4% miss in EBITDA of S/A performance as 1) ASP came in lower at Rs162.2k/unit(est Rs166.8k/unit) and 2) S/A gross margins came in lower at 41.7% (est 42.2%) led by product mix and delayed impact of product price hike (price protection for Hunter). EIM’s margins expansion to be gradual as impact of weaker product mix (increasing contribution from Hunter) to partially offset by 1) price hikes of ~1.5% for Hunter in Nov’22, 2) + operating leverage due to higher volumes and 3) increased share of exports as Hunter has been launched in exportsmarkets. We cut FY24/25 consol EPS by 3%/3.7% to factor in for weaker mix related gross margins contraction and lower ASPs. After witnessing severe headwinds over last 24‐30 months, we expect volumes to grow ~21% CAGR over FY22‐25E (v/s ‐7% CAGR in FY20‐22). Recent launches could be an inflection point for RE as a completely new and improved platform could drive a revival. VECV would see a cyclical recovery in volume and profit, in turn boosting consolidated PAT CAGR to 21% over FY23‐25E. Stock trades at 23.5x/20.2x FY24E/FY25E consol EPS.
Outlook
We maintain BUY with SoTP based revised TP of Rs3,942 (v/s Rs4,094). We value S/A business at 25x (~15% discount to 10yr LPA). EIM is one of our preferred picks from 2W OEM space.
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