Eicher Motors (4QCY14) : Strong growth outlook. Maintain BUY ::HDFC Sec

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VECV, RE to pull up performance together! • Eicher Motors:: ICICI Securities, PDF link

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Eicher Motors Royal Enfield does well, CVs dip again; Sell :: Anand Rathi

Eicher Motors
Royal Enfield does well, CVs dip again; Sell
Key takeaways
Royal Enfield’s performance steadfast. The operating performance at
Royal Enfield (RE) is expected to be strong, helped by robust sales and
operating leverage. Following ~70% yoy volume growth, we expect income
to grow ~76% yoy, to `5.2bn. EBITDA margin is expected to be 18%, up
750bps yoy. As a result, we expect Eicher Motors’ standalone profits to be
`705m, up 2x yoy.
Lower CV sales to hit VE Commercial Vehicles’ performance. For the
subsidiaries, we expect ~14% decline in revenues and 39% yoy decline in
EBITDA. We expect EBITDA margin to be 4.4% (lower 120bps qoq, and
180bps yoy). Due to higher depreciation, profit is expected to decline 70%
yoy to `114m.
Consolidated profits to be led by RE. Consolidated revenues would be
impacted due to the current slump in M&H CV sales, but strong standalone
performance is likely to undo a lot of the damage. We expect revenues to
grow 2.1% yoy in the consolidated results. On weaker CV sales, we expect
EBITDA margin to come at 8.6% (down 70bps qoq). We expect the adjusted
net profit to be `819m, up 12.6% yoy.
Our take. Royal Enfield continues to be robust due to greater capacity and
sustained demand. The M&H CV slide, however, is expected to result in a
lower growth rate for VECV. The recent run-up in the stock price has
rendered valuations rich. While we are optimistic from a long-term
perspective, we downgrade the stock to a Sell to reflect the premium
valuations. Our target price is `4,220. At the ruling price, the stock trades at a
PE of 29.6x CY14e. Risks. Upside: Sequential improvement in operating
performance, recovery in the CV cycle in CY15, and quicker revenue
accretion from the engine plant.

Eicher Motors Royal Enfield targets 250,000 units next year (+40% y/y), CV sales to be driven by Pro series - Company Visit Note::JPMorgan

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

Eicher to roll out next generation 'Pro Series' trucks; target to double market share - Company Visit Note :JPMorgan

Eicher launched its new commercial vehicle range, the ‘Pro’ series. The
new range will be rolled out across the entire product spectrum (from 5-49
tonnes). With this roll out, VECV has signaled its intent to double its
current market share of about 4% in the next three years in the heavy duty
segment.

Eicher Motors-TP: INR3,850 Buy :: Motilal Oswal

At inflection point
Multiple growth drivers in place
 With several of its projects to commence in CY13-14, driving 28% sales CAGR and 34%
EBITDA CAGR over CY12-15, Eicher Motors (EIM) is at an inflection point.
 Its motorcycle business will benefit from capacity expansion (new plant to start in
1QCY13), new launches (Thunderbird 500 and Café Racer), and network expansion.
 CV subsidiary, Volvo Eicher Commercial Vehicles (VECV), will benefit from the
commencement of the Medium Duty Engine Project (MDEP) and ramp-up in HCVs.
 Buy with a target price of INR3,850, 45% upside over two years. EIM's strong balance
sheet (net cash increasing to INR16.9b by CY15E) limits downside risk, in our view.

Eicher Motor, At inflection point:: Motilal Oswal

At inflection point
Multiple growth drivers in place
 With several of its projects to commence in CY13-14, driving 28% sales CAGR and 34%
EBITDA CAGR over CY12-15, Eicher Motors (EIM) is at an inflection point.
 Its motorcycle business will benefit from capacity expansion (new plant to start in
1QCY13), new launches (Thunderbird 500 and Café Racer), and network expansion.
 CV subsidiary, Volvo Eicher Commercial Vehicles (VECV), will benefit from the
commencement of the Medium Duty Engine Project (MDEP) and ramp-up in HCVs.
 Buy with a target price of INR3,850, 45% upside over two years. EIM's strong balance
sheet (net cash increasing to INR16.9b by CY15E) limits downside risk, in our view.

Eicher Motors:: Operating performance disappoints ; Maintain Neutral :: Centrum

Operating performance disappoints ; Maintain Neutral
The 3QCY13 operating performance of Eicher Motors (EML) reflected significant
pressure on its Truck & Bus segment with VECV’s EBITDA margins coming at 5.8% (one
of the lowest in the past several quarters) compared to our estimate of 7.3%. Royal
Enfield business also marginally disappointed with EBITDA margins at 15.1% compared
to our estimate of 15.8%. As a result, Consolidated EBITDA margins for EML stood at
7.5% compared to our estimate of 8.9%. Though the Royal Enfield business is doing
extremely well, we continue to believe that current discounts and negligible rise in fleet
operators’ pricing power suggest weak demand environment for M&HCV goods
segment. We expect the recovery to be gradual for the M&HCV goods segment over
2HFY13-FY14E and await meaningful signs of recovery in the investment cycle before
re-rating the stock. We continue to maintain our Neutral rating on the stock with target
price of Rs.2,433.

Eicher Motors - Initiation - Centrum

Eicher Motors

Neutral

Target Price: Rs2,290

CMP: Rs2,249

Upside: 2%

Well placed but at rich valuations

Eicher Motors Ltd. (EML) is the 3rd largest M&HCV (medium and heavy commercial vehicle) manufacturer in India with overall market share of 12.2% in the domestic truck market. While EML commands a significant market share of 38% in the medium tonnage trucks (GVW of 7.5T-12T), it has been able to consistently increase its market share in >12T segment to 4.1% from 1.1% in CY2009, thanks to its association with Volvo. We expect market share gains for EML to continue in >12T segment driven by its focused product and market strategy. We expect domestic CV sales volumes to grow at a CAGR of 17% over CY12E-CY14E. Domestic motorcycle sales volumes are also likely to continue at a CAGR of 29% over CY12E‐CY14E led by a healthy order book and capacity expansion. Robust volume growth in CVs and motorcycles is likely to result in positive operating and financial leverage over CY12E‐CY14E. Though, we continue to like the stock, we are initiating coverage on the company with a Neutral rating as it offers limited upside from current levels based on our SoTP valuations of Rs.2,290. 

Automobiles - Delhi Visit - Centrum

Delhi visit note

Automobile

Eicher Motors, Munjal Showa and Maruti Suzuki

In our recent trip to Delhi, we met the management of Eicher Motors, Munjal Showa and Maruti Suzuki to get recent updates on business developments.  

The following are the key takeaways of the meetings:

Eicher Motors - Motorcycles the near-term growth driver; visit note; Buy :: Edelweiss PDF link

Eicher Motors (EIM IN, INR 1,991, Buy)

We met the management of Eicher Motors (Eicher) to get the company’s latest business update. Waiting period for Royal Enfiehld motorcycle continues, with the company not being able to meet demand. Thunderbird 500 launch is due in Q3CY12. Additional capacity is coming on stream in Q1CY13. On the truck side, the company is still gaining market share, although demand has slowed down. Increase in discounts could pose margin risk in near term. Maintain ‘BUY’ with TP of INR2,807. 

Eicher Motors Ltd : BUY : Hem Secrities

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Eicher Motors Limited, incorporated in 1982, is the flagship
company of the Eicher Group in India and a leading player in the
Indian automobile industry. Its 50-50 joint venture with the Volvo
group, VE Commercial Vehicles Limited, designs, manufactures
and markets reliable, fuel-efficient commercial vehicles of high
quality and modern technology, engineering components and
provides engineering design solutions. Eicher Motors
manufactures and markets the iconic Royal Enfield motorcycles.
The company has registered strong numbers for the quarter
ending December 2011. The sales moved up 27% to Rs. 15766.40
million for the December 2011 quarter as compared to Rs.
12435.10 million during the year-ago period. Operating profit
too jumped about 28% in Q4CY11 at Rs. 1538.40 million. EML
has witnessed sharp growth across all segments coupled with
increasing market gains. A comparatively good net profit
growth of 55.74% to Rs. 854.40 million was reported for the
Q4CY11 compared to Rs. 548.60 million of previous same
quarter.
In Q4 the industry grew by around 10.6% and Eicher has
outperformed the industry by a good margin; so for the year it
grew at 26.6% over 2010 and for Q4 it grew by 25% so it has
beaten the industry by 15% and that has resulted in market
share gains.
EML’s management look forward to another year of profitable
growth with up gradation of its existing product range, capacity
expansion and increasing its market reach.
Valuation
With leadership position in premium segment motorcycles and
leisure biking, strong distribution channels, robust volume growth
and high realizations and increasing market presence; Eicher Motors
Ltd. growth prospects looks promising. We believe Eicher Motors is
trading at an attractive valuation at 15.68x and 12.07x of FY12EPS of
Rs.134.78 and FY13EPS of Rs.174.98. We initiate a ‘BUY’ on the stock
with a target price of Rs.2600 (appreciation of about 23%) with the
medium to long term investment horizon.

Buy Eicher Motors: A new Commercial Vehicle powerhouse: Ambit

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A new Commercial Vehicle powerhouse
With our expectation of market share gains in heavy tonnage trucks,
margin improvement and significant outsourcing opportunities from
Volvo, we believe Eicher is poised to emerge as a powerhouse in the
Indian commercial vehicle industry over the long term.

Eicher Motors - Management meet update::ICICI Securities (PDF link)

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http://content.icicidirect.com/mailimages/ICICIdirect_EicherMotors_MagamentMeetUpdate.pdf

Eicher Motors: Results good; Outlook remains positive : Nirmal Bang

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Results good; Outlook remains positive
Eicher Motor results are good. Although parent company (12% of consolidated sales) saw some decline on account of lower sales on Bullet motorcycle but subsidiary continue to perform well. Outlook continues to remain positive.
Key Highlights
Eicher Motors Ltd (EML’s ) consolidated revenues increased 26.8% YoY to Rs 1,568 crs in Q4CY11 against Rs 1,235 crs in Q4CY10 due to 25% YoY volume growth in the VE Commercial Vehicle (VECV) business and 28% YoY volume growth in the Royal Enfield business.
Lower sales of 2W led by the annual maintenance shutdown caused consolidated EBITDA margin to drop by 65 bps QoQ, although it improved by 7 bps YoY to 9.8%. EBITDA margin of the two-wheeler business improved by 90 bps YoY to 9.2% (but down 360 bps QoQ) whereas EBITDA margin for VECV remain flat YoY but dropped by 60 bps QoQ to 9.8%.
PAT grew 55.7% YoY to Rs 85.4 crs in Q4CY11 against Rs 54.9 crs in Q4CY10. This was led by 79.8% YoY increase in other income to Rs 42.89 crs and lower tax rate which was at 22.6% in the current quarter as compared to 27.3% in Q4CY10.
Management is guiding the 2W monthly production to reach 8,500 units per month by the end of CY12 vs the current levels of 7,000 units per month. Despite the mining sector-related issues affecting demand for heavy duty CVs, VECV volume was up at 2,180 units in Q4 CY11.
Valuation & Recommendation
Eicher Motors has posted good growth in both top-line as well as bottom-line for yet another quarter. As Eicher Motors enjoys the premium position in the industry by being the only manufacturer of premium segment bikes in India and having JV with world’s largest player in HCV segment, it is well poised to increase its market share.
Considering the robust earnings growth and strong balance sheet, we believe that EML will continue with its growth story in the coming years. In addition to that, the company enjoys strong financial health and cash position which has helped the company to maintain debt at comfortable zone. On consolidated basis the cash per share stands at Rs 633.5.
At CMP, the stock is trading at P/E of 13.2x CY12E and 11.3x CY13E. Though the near term outlook for the stock is slightly subdued, we believe that the stock can be ‘accumulated on decline’ from a long term perspective as we see potential upside in the stock.

Result Update: , Eicher Motors Ltd, Sun Pharma, Motherson Sumi Systems Ltd, State Bank of India :: Emkay

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Click in link to read report: Result Update

Eicher Motors Ltd Reco: HOLD CMP: Rs 1,705 Target Price: Rs 1,915 Mixed bag, Downgrade to HOLD ·      EBIDTA at 1.5bn (4% below est). APAT at Rs 854mn (in line). CV business surprised positively, while two wheeler performance was below est. ·      Waiting list for two wheelers continues despite capacity increase. Strong CV performance will be driven by expansion in HD ·      Fine tune CY12 est. by -2% to Rs 137.8. Introduce CY13 with EPS of Rs 161. See downside risk to vol. est. due to macro environment/capacity constraints ·      Downgrade to HOLD with a TP of Rs 1,915 (current business value – Rs 1,762, NPV of engine business – Rs 153). Key triggers – faster capacity addition of two wheelers

Sun Pharma Reco: ACCUMULATE CMP: Rs 552 Target Price: Rs 586 Strong Performance - Maintain Accumulate ·      Sun Pharma’s Q3FY12 results - Revenues at Rs21bn (up 34% YoY), EBITDA at Rs9.6bn (up 119% YoY) and RPAT at Rs6.6bn (up 91% YoY) ·      Strong performance was led by 63% growth in US which was driven by ramp-up in market share of recently launched products, increase in selling prices of select products in Taro and INR dep. Domestic biz grew 17% ·      Going forward in FY13E, growth will be driven by Para-IV launch of Lexapro, Plavix, Eloxatin and Stalevo in US and continued momentum in domestic biz ·      With strong traction from US market and a stable domestic business – we maintain Accumulate rating with a revised target price of Rs586 at 21x FY13E EPS of Rs28

Motherson Sumi Systems Ltd Reco: ACCUMULATE CMP: Rs 174 Target Price: Rs 210 In line, Retain ACCUMULATE ·      EBIDTA at Rs 2.6bn was in line (est. Rs 2.5bn). APAT at Rs 1.2bn was above est. of Rs 885mn due to lower tax rate. SMR reports 150bps QoQ margins expansion with higher utilization ·      Peguform reports Sales/Adj. EBITDA/APAT of Rs11.5bn/Rs 43mn/ Rs -156mn for 38 days. Peguform to be EPS accretive but not assigning value due to limited information ·      Concerns with Debt overdone. Net Debt (ex Peguform) is Rs 16bn (marginally up QoQ).  Of the total gross debt of Rs 29bn of Peguform, debt attributable to MSSL is only Rs 11bn ·      Retain ACCUMULATE with a TP of Rs 210.  SMR margins to further improve with increase in utilization. Major benefit visible from 2QFY13

State Bank of India Reco: HOLD CMP: Rs 2,129 Target Price: Rs 1,950 Slippages remain higher; capital infusion inadequate ·      SBI Q3FY12 – NII at Rs114bn ahead of estimates aided by higher loan growth and strong NIM at 4.1%. However, with lower other inc, PAT at Rs32.6bn came in line with our est ·      Asset quality continues to disappoint with gross slippages at Rs81bn (3.6% ann). Further, despite equity infusion, Net NPL / networth would stand at high 20%+ for FY12 ·      Loan growth at 7% qoq came in as a surprise. With 3% qoq growth in deposits, LDR inched 330bps qoq to 85%. Mgmt guided for 16% yoy loan growth for FY12 ·      Capital infusion + plough back of PAT would raise tier I CAR to 9%.  Also, with lower accretion in net slippages, pressure on asset quality to ease. Upgrade to Hold with PT of 1,950

PDF link- Eicher Motors report

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Summary

click to view report

Eicher Motors Ltd at CMP of `1,770 is trading at a P/E multiple of 12.2x its CY13 consensus earnings of `145. With new Royal Enfield plant slated to commence production from Q1CY13, robust growth from the heavy duty segment and the new engine project coming on stream in CY13, company looks fairly priced at this juncture. 

52-WEEK BLOCKBUSTER: EICHER MOTORS :: Business Line

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Despite the auto industry going through a cyclical slowdown, a leadership position in the premium bikes segment (>250 cc bikes) and an improving dealer penetration in the commercial vehicles space has come to the rescue of Eicher Motors. For the April-December 2011 period, its two-wheeler volumes (Royal Enfield) grew by 44 per cent.

Overall sales in the commercial vehicles segment too recorded a healthy 26 per cent rise. Aided by strong volume growth and better realisations, for the nine months ended September 2011, consolidated net sales grew by 30 per cent to Rs 4,109.5 crore and net profits, by 66 per cent to Rs 223 crore.

While the company currently enjoys about 35 per cent market share in light and medium commercial vehicles (up to 12 tonne trucks), with the catching on of the hub and spoke model, Eicher is now focusing on sprucing up its heavy vehicles portfolio. From less than five per cent market share in this segment, it hopes to increase it to 15 per cent by 2015. Towards this end, the company is expanding capacity for commercial vehicles. It is also setting up an engine plant with Volvo, which would become operational by mid-2013.

Going forward, strong demand, stable raw material prices and a richer product mix is expected to aid earnings growth.

Eicher Motors :Time to scale up :ICICI Securities

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T h e   t ime   h a s   c ome   t o   s c a l e   u p…    
We met the management of Eicher Motors (EML) to get an insight into the
specific growth plans of EML and understand their business model. EML’s
standalone operations consist of  niche cruiser motorcycles (Royal
Enfield), which encompasses strong growth possibilities with the
emerging trend of lifestyle biking in India. The consolidated operations
include commercial vehicle business through its JV with AB Volvo
(VECV). VECV has a strong presence in the intermediate commercial
vehicle (ICV) segment with numerous  product offerings in the 7.5-12
tonne category. Moreover, joint development of engines with Volvo
provides a technological edge, which  would serve as a revenue driver,
going ahead. We believe, with increasing focus on the HCV segment,
EML is poised to grasp growth opportunities by leveraging its partnership
with international CV giant Volvo.
ƒ Strong brand loyalty coupled with expansion to drive revenues
EML enjoys strong brand equity in the niche above 250 cc segment with
popular product offerings like Royal Enfield Classic and Bullet. Rising
income levels have backed the demand for cruiser bikes (low speed, high
torque) augur well for Royal Enfield. In view of the rising demand (~12
months waiting period), the company has plans to expand its capacity to
12,500/month by FY13E from 6000/month currently and has already
acquired land in Chennai.
ƒ Strong footing in intermediate CV space, HCV next target
EML has a strong presence in the domestic LCV (<12 tonne) segment
with market share of ~35%. However, its market share in the HCV space
is languishing at ~3%. We believe with the technological edge provided
by Volvo, EML is geared up to grasp opportunities in the HCV space. This
gradual shift in focus will lead to  a richer product mix yielding higher
realisation on a blended basis.
ƒ Joint engine development to provide technological edge
AB Volvo has made VECV its global manufacturing hub for supply of
medium duty engines to satisfy is global needs. Volvo plans to establish a
manufacturing hub at VECV’s Pithampur facility for supplying Euro 3 and
4 compliant engines and Euro 5 and 6 base engines. This would provide
the technological edge and an additional revenue lever for EML assisting
in realising its target of ~15% market share in the HCV market by 2015.
View
EML has a strong presence in the niche cruiser motorcycle segment and the
intermediate CV segment. Strong brand equity and expansion plans will fuel
revenue growth while JV with AB Volvo will grant technological benefits.
Strong return ratios, multiple growth levers and cash generating nature of
business make EML an attractive investment play. At the CMP of | 1610,
EML is trading at 22.8x CY10 EPS and 1.3x P/BV of its CY10 book value.

Eicher Motors Ltd: Accumulate on Decline: Nirmal Bang

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On a boulevard to success !!!!!!
Eicher Motors Ltd (EML) is present in commercial vehicles, two wheelers and related component and design services. Volvo entered into a JV (VECV- Volvo Eicher Commercial Vehicles) with EML as joint promoter of the commercial vehicles business.
Increasing demand for Royal Enfield
EML rides high on success of its Royal Enfield business. The brand has now been highly recognised and leading to exceptional growth in demand (6-8 months waiting period). EML is increasing capacity for Royal Enfield from existing ~70,000 units to ~150,000 units in CY13.
Commercial Vehicles to benefit from JV
Combined efforts of Volvo's technological proficiency and high quality standards, together with EML's distribution and low cost manufacturing will lead the road to success in HCV space
Global Manufacturing Hub
Volvo Group plans to make VECV’s plant in Pithampur the base for its futuristic Medium Duty Engine global Platform involving an initial investment in industry of Rs 2880 mn. The 5 and 8-litre engines will be produced and assembled in India.
Slowdown in the CV industry
The overall CV industry is facing a slowdown in line with the overall automobile sector and raising concerns of lower economic growth. As Eicher follows calendar year the overall impact of this slowdown will not be visible in its CY11 numbers. However, going forward we believe that Eicher will also witness pressure in this segment in CY12. Despite this, the long term story remains intact. With recovery in demand in late CY12 and CY13 and enhanced capacity we believe that Eicher is poised for strong growth in the long term.
Valuation & Recommendation
Although, the final results of the steps taken by the company will be clearly visible from Q1CY13 onwards, we believe that the company has taken the right steps in the right direction and the initial success signs are visible.
Considering the robust earnings growth and strong balance sheet, we believe that EML will continue its growth story in the coming years.
At CMP, the stock is trading at P/E of 14.8x CY11E, 12.2x CY12E and 11.1x CY13E. Though the near term outlook for the stock is slightly subdued, we believe that the stock can be ‘accumulated on decline’ from a long term perspective. On consolidated basis cash per share comes to Rs 629.