Eicher Motors Q1 results: Royal Enfield shines, VECV still struggling

Revenue: Rs 1974 cr (up 141% YoY/ down 33% QoQ)

Net Profit: Rs 237 cr (up from a loss of Rs 55 cr in Q1FY21/ down 55% QoQ)

EBITDA margin: 18.6% (up from 0.2% on-year/ down from 22.9% on-quarter)

Highlights:

• The year on year growth looks impressive because of a low base caused last year by nationwide lockdown.
• Although the numbers declined on-quarter, they were slightly above street estimates.
• Eicher Motors’ business was yet again impacted by Covid-induced lockdowns in Q1 this year, leading to a decline in numbers compared to the previous quarter.
• The whole automobile industry including Eicher Motors is suffering from semiconductor shortages which has affected their production ability. This is expected to continue till the end of 2021.
•  Eicher Motors has also planned a capex of Rs 500 cr this financial year.

Royal Enfield Business:

Volumes: 122,170 units (up 113% YoY/ down 40% QoQ

Highlights: 

1. Eicher Motors announced commencement of its second international assembly of motorcycles in Colombia, the third-biggest motorcycle market of Latin America, in partnership with its local distributor. The first is in Argentina.
2. Royal Enfield expanded its presence in international markets and commenced operations in Singapore and the Netherlands with the launch of standalone, flagship stores.
3. According to Royal Enfield, they had the best ever quarterly performance in international markets induced by strong performance in the Americas. The total exports were at 17,493 units, up 400% YoY.
4. Vinod K Dasari, CEO of Royal Enfield is stepping down with effect from August 13. He will be replaced by B Govindarajan, COO at Royal Enfield since 2013. He is planning to dedicate his time to building affordable and accessible healthcare facilities and has recently started a hospital in Chennai.

VECV Business: 

Volumes: 5,806 units (up 172% YoY/ down 68% QoQ)

Revenue: Rs 1639 Cr (up 156% YoY/ down 119% QoQ)

Net profit: A loss of Rs 72 cr (up from a loss of Rs 120 cr on-year/ down from profit of Rs 127 cr)

Highlights:

1. Commercial vehicles business was also hurt by the same macro factors such as lockdown.
2. Eicher expects demand to pick up when customers start replacing old trucks and buses with new BS6 vehicles.

Eicher Motors Q1FY22 earnings: Review

Eicher Motors has reported a decent set of numbers in the Apr-Jun 21 period, in the context of the ongoing challenges such as semiconductor shortages and Covid-19 induced disruptions. Royal Enfield’s best ever performance in international markets (due to a robust rise in the Americas) aided the company’s performance in the period. Eicher Motors was able to increase its domestic two-wheeler market share to 3.87% at the end of the quarter, as compared to 3.6%, on the back of a rise in sales of Royal Enfield. 

While the ongoing environment is difficult for the auto players due to the semiconductor shortages and Covid-19 related uncertainties, Eicher Motors has the necessary firepower to tide over these difficult times.