Eicher Motors -Back on track: Emkay

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Eicher Motors

Back on track

ACCUMULATE

CMP: Rs1,101                                        Target Price: Rs1,505

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n     Worst is behind; Growth and profitability back on track. CY10 margins of 8.1% sustainable with an upward bias

n     Expect M&HCV comeback to succeed this time due to strong support from Volvo. Expect 18% CAGR M&HCV growth (twice that of industry) during CY10-12

n     High ROIC (>100%) despite an asset heavy M&HCV business to ensure cash generation. Healthy growth in 2-wheelers (29% volume CAGR) & outsourcing potential to chusion business model

n     Expect a 22.7% EPS growth during CY10-12. Initiate coverage with a Accumulate rating and a SOTP price target of Rs 1,505. Key risks are execution delays and higher metal prices