We met with Eicher Motors management. Key takeaways: Management is
upbeat on the two-wheeler business, as demand continues to surprise on the
upside, while growth in the CV business will be driven by the rollout of the
new “Pro” series, even though industry conditions remain challenging.
Royal Enfield: The demand for lifestyle bikes continues to surprise on the
upside, with the products continuing to have waiting periods despite
increased production. Management targets production of 250,000 units next
year (vs. ~175K this year). The OEM will focus on exports, as well,
wherein it will position its bikes in the mid-segment 300-500cc category
with the launch of the new Cafe Racer – 500cc Continental GT bike. This
model is positioned below the larger bikes currently offered by Harley
Davidson, Triumph, etc.
Eicher Volvo targeting to double market share in CV segment: Eicher
currently has a market share of ~4% in the heavy duty truck range (16t and
above) and ~13% in the M/HCV category (7-49t). The existing CV platform
was improved following the tie-up with Volvo in 2008, with inputs from the
Swedish OEM. The new “Pro” series models that will be rolled out from
next year will be built on an entirely new platform developed by VECV for
the Indian market. The new models will be rolled out gradually across
segments over the next 12-15 months. The new heavy duty truck range will
be powered by new-generation engines adapted from the Volvo Group with
power capacity of 180-280hp (please see our earlier note: Pro Series launch).
CV demand remains soft: The commercial vehicle cycle remains weak,
with no near-term signs of a pickup visible.
The OEM will invest Rs7 billion in capex next year.
Valuation: Consensus EPS (Bloomberg) for the stock is Rs149, Rs217 and
Rs276 for CY13E, CY14E and CY15E, respectively, implying P/E multiples
of 33x, 23x and 18x, respectively.
NOTE: THIS DOCUMENT IS INTENDED AS INFORMATION ONLY AND NOT AS
A RECOMMENDATION FOR ANY STOCK. IT CONTAINS FACTUAL
INFORMATION, OBTAINED BY THE ANALYST DURING MEETINGS WITH
MANAGEMENT. J.P. MORGAN DOES NOT COVER THIS COMPANY AND HAS
NO RATING ON THE STOCK
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upbeat on the two-wheeler business, as demand continues to surprise on the
upside, while growth in the CV business will be driven by the rollout of the
new “Pro” series, even though industry conditions remain challenging.
Royal Enfield: The demand for lifestyle bikes continues to surprise on the
upside, with the products continuing to have waiting periods despite
increased production. Management targets production of 250,000 units next
year (vs. ~175K this year). The OEM will focus on exports, as well,
wherein it will position its bikes in the mid-segment 300-500cc category
with the launch of the new Cafe Racer – 500cc Continental GT bike. This
model is positioned below the larger bikes currently offered by Harley
Davidson, Triumph, etc.
Eicher Volvo targeting to double market share in CV segment: Eicher
currently has a market share of ~4% in the heavy duty truck range (16t and
above) and ~13% in the M/HCV category (7-49t). The existing CV platform
was improved following the tie-up with Volvo in 2008, with inputs from the
Swedish OEM. The new “Pro” series models that will be rolled out from
next year will be built on an entirely new platform developed by VECV for
the Indian market. The new models will be rolled out gradually across
segments over the next 12-15 months. The new heavy duty truck range will
be powered by new-generation engines adapted from the Volvo Group with
power capacity of 180-280hp (please see our earlier note: Pro Series launch).
CV demand remains soft: The commercial vehicle cycle remains weak,
with no near-term signs of a pickup visible.
The OEM will invest Rs7 billion in capex next year.
Valuation: Consensus EPS (Bloomberg) for the stock is Rs149, Rs217 and
Rs276 for CY13E, CY14E and CY15E, respectively, implying P/E multiples
of 33x, 23x and 18x, respectively.
NOTE: THIS DOCUMENT IS INTENDED AS INFORMATION ONLY AND NOT AS
A RECOMMENDATION FOR ANY STOCK. IT CONTAINS FACTUAL
INFORMATION, OBTAINED BY THE ANALYST DURING MEETINGS WITH
MANAGEMENT. J.P. MORGAN DOES NOT COVER THIS COMPANY AND HAS
NO RATING ON THE STOCK
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