Eicher Motors posted Q3 Results: Net profit declines 14.3%, missed estimates

Eicher Motors Q3 Results
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Net profit drop - Eicher Motors reported a net profit of Rs 456.13 crore for the Oct-Dec quarter, a decline of 14.35% YoY. In the year-ago period, it reported a net profit of Rs 532.59 crore. Sequentially, profit is higher by 22% from Rs 373 crore.

Revenue rise - The revenue reported by the company for the December quarter is Rs 2,880.65 crore, up 1.85% YoY. In Q3FY21 the company reported total revenue of Rs 2,828.26 crore. Sequentially, the revenue was up by 28%.

EBITDA and margins - The EBITDA reported by Eicher motors was Rs 582 in Q3FY22 compared with Rs 672 crore in Q3FY21. Sequentially, the EBITDA was up by 35.3%. 

The EBITDA margins for Q3FY22 declined by 350 bps on year to 20.2% while QoQ there was an improvement of 110 bps. The net margins at 15.8% declined by 300 bps on year and by 80 bps on a sequential basis.

Vehicles sold - The company sold 1,67,664 motorcycles between October and December, a decline of 15.6%. In the same period, year-ago, it sold 198,557 motorcycles. The ongoing global shortage of semiconductor chips and the onset of the third wave of Covid with Omicron were the primary reason for lower sales in the December quarter.

International unit update - Royal Enfield strengthened its presence in Asia-Pacific with the commencement of operations at its local assembly unit and CKD (completely knocked down) facility in Thailand. Eicher motors now has three local CKD units - in Argentina and Colombia in Latin America, and Thailand.

Royal Enfield continued to witness strong traction in its international markets. It sold 17,036 units during December, which is a growth of 57%.

New launch - The all-new Classic 350 has also been launched in APAC markets as well as made its debut in Europe at EICMA 2021. The company has already manufactured and rolled out more than 1,00,000 units of the new Classic.

Volvo-Eicher Commercial Vehicles (VECV) - The revenue from this segment stood at Rs 3,626 crore, up by 35% from Rs 2,680 crores in the same period a year ago. The raw material inflation impacted the performance of the business which generated an EBITDA margin of 6.7% compared to 8.4% in the year-ago period. Profit for Q3FY22 came in at Rs 66.0 crore as compared to Rs 58 crore during the same period last year.

Brokerage view 

CLSA on Eicher Motors: Buy | Target Rs 3330

CLSA maintained a buy rating on Eicher Motors post December quarter results with a target price of Rs 3330 that translates into an upside of nearly 30 per cent from Rs 2571 recorded on 14 February. Although Eicher Motors missed estimates, there is stronger visibility on volume, said the note. Royal Enfield's results were below expectations, but the volume outlook is strong.

No plans on entry into an electric motorcycle in the near term. The global investment bank raised our EPS estimates by 8%-9% over FY23-24.

Motilal Oswal on Eicher Motors:

Brokerage firm Motilal Oswal pegs the operating revenues at Rs 3,037 crore at a YoY growth of 7.4 percent and a sequential growth of 35 percent.

The net realisations for Royal Enfield are expected to improve by 25 percent on-year to Rs 1,75,000 per unit.

“Availability of semiconductors for ABS (anti-lock braking system) aids recovery in volumes towards end of the reported quarter, Volvo-Eicher Commercial Vehicles (VECV) volumes improve QoQ, but higher discounts and cost inflation to keep margins in check,” Motilal Oswal said in its report.

Kotak Institutional Securities on Eicher Motors: 

Kotak Institutional Equities expects a 2.8 percent on-year increase in operating revenues at Rs 2,907 crore which is, on a sequential basis, an increase of 29 percent.

“We expect revenues to increase by 3 percent YoY in Q3FY22 led by 21 percent YoY increase in ASPs (average selling price) due to a richer model mix and price hikes taken over the past few quarters, partly offset by 15 percent YoY decline in volumes,” the brokerage said in its report.

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