Buy Eicher Motors; target of Rs 23,960: Motilal Oswal

Motilal Oswal's research report on Eicher Motors

Consol. revenue grew 3% YoY to INR23b. Adj. PAT increased 0.4% YoY (-5.9% QoQ) to INR5.3b. EBITDA margin shrank 220bp YoY (-130bp QoQ) to 29%. For 9MFY19, revenue/EBITDA/PAT grew 13.5%/10.3%/9.4% YoY. RE's net realization improved 5.4% QoQ (+10.1% YoY) to INR121k, led by a favorable mix and a price increase for ABS/ disc brakes. EBITDA margin contracted 220bp YoY (-110bp QoQ) to 29.5% due to the launch expense related to 650cc Twins, negative operating leverage and RM inflation. Adj. PAT increased 6% YoY to INR5b. VECV's realizations grew 4.9% QoQ (+4.3% YoY) to INR1.66m. EBITDA margin shrank 210bp YoY (-240bp QoQ) to 6.6%, led by higher discounts and a weak mix. PAT grew 43% YoY (-46.5% QoQ) to INR760m.

Outlook

We cut our FY20/21 consol. EPS estimate by 2-3%, as we cut VECV earnings by 8%/9% to factor in the weak operating performance. Maintain Buy with a TP of INR23,960 (Mar'21E SOTP-based).

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Read More First Published on Feb 13, 2019 04:02 pm