7 EICHERMOT share price target reports by brokerages below. See what is analyst's view on EICHERMOT share price forecast, rating, estimates, valuation and prediction behind the target. You may use these research report forecasts for long-term to medium term for your investment or trades in 2020.
We upgrade EIM to BUY (from Hold), with an SOTP-based TP of INR 18,032 (Mar-22, earlier TP at Rs20,681) as recent correction in valuations factors in likely near term challenges due to COVID-19 and BS6 transition impact. We believe structural drivers are place with, 1) its focus on increase in penetration in key motorcycling states like UP, MP, Rajasthan, Gujarat (where penetration is <5%), 2) RE’s monopoly is intact in 300+ CC segment and 3) focus on exports with middle weight motorcycle segment gaining traction in key exports markets (250-750cc). We factor in for CoVID-19 impact on 1QFY21 sales at -50% YoY/QoQ and margins by ~600bp decline to 18%. We expect network expansion, new product launch and growth in exports to boost RE sales. The stock is trading at ~30% discount at ~20x (v/s 30.4x 5 year LPA). We cut FY21/22 consol EPS by 17-19% to factor in for lower volumes and negative operating leverage. We maintain our multiples (P/E of 21x for RE and EV/EBITDA of 8x for VECV).
We believe, the recent underperformance in the stock factors in the near term negatives (such as BS6 cost increase and initial demand impact due to BS6 transition). We therefore build in ~24.5% EBIDTA margins for FY21E (v/s 25% in FY20E) and gradual recovery in FY22E. The stock currently trades at 23x (v/s 25x 10 year LPA). We upgrade the stock to ‘Hold’ (from reduce) with a revised target of Rs20,681 (v/s Rs20,280 earlier), at 21x Dec-22EPS while we cut consol EPS by 3% for FY21 and while maintaining unchanged for FY22E.
We are increasing our EPS estimates for FY20/FY21 by 16%/8.5%, as we increase volumes/margins for both businesses. The stock trades at ~29.7x/23.4x FY20E/FY21E consol. EPS. Maintain Buy with TP of ~INR24,900 (Sep’21 SOTP-based).
EIM’s 2QFY20 operating performance was in-line with consolidated margins with EBITDA at Rs5.4bn and margins at 24.7% (PLe: 25.4%, 560bp YoY, -110 QoQ). Going forward, margin profile to remain weak led by a) negative operating leverage and b) increased cost pass through pressure related to BS6 in weak demand environment. These can be partially offset by RM tailwinds in coming quarters. VECV performance was significantly weak as reflected in 14 quarter low EBITDA margins at 5.2%. With margin profile remaining range bound at ~25% and stable return rations, we maintain ‘Reduce’ with a target price of Rs19,152 (earlier Rs16,800), at 21x Sep-21EPS. We raise consol EPS estimates by ~2% each in FY20/21 to factor in for lower tax rate ~25.5% (v/s 27% earlier).
Eicher Motors Limited (EML) manufactures motorcycles and accessories. The company owns the iconic Royal Enfield brand and also has a joint venture with AB Volvo – Volvo Eicher Commercial Vehicles (VECV). Q1FY20 sales fell 6.8% YoY to Rs. 2,361cr due to sluggish market demand. EBITDA margin came in at 25.8%, down 610bps YoY, as EBITDA declined 24.1% YoY. Total motorcycle volumes declined 19.2% YoY to 181,966 units mainly on lower domestic volumes (down 21.5% YoY). Commercial vehicle (CV) volumes fell 18.3% YoY owing to weakness in the overall economy and the liquidity squeeze in NBFCs. We assign Hold rating to the stock with a target price of Rs. 16,558 based on SOTP.
We met the management of Eicher Motors. Launch of entry level ‘Bullet’ and roll out of 250 small format stores are the new strategies to revive volume growth under the leadership of Mr. Dasari. In light of the upcoming BSVI regulations, the emission related cost hikes will impact consumer affordability. Thus, an entry variant in these circumstances will drive customer footfalls. The market response/profitability of the new variants needs to be monitored. We reduce our FY20/21 estimates by ~10% to factor in the sluggish demand and roll forward our estimates. Reiterate SELL with a TP of Rs 14,245 (at 19x Sep21 EPS) as lifestyle segment demand remains challenged.
RE’s EBITDA margins at 25.8% (-640bp/190bps YoY/QoQ) declined sharply as the ABS related cost hikes had to be absorbed by the co. Amidst a slowing economy, lifestyle bikes demand is impacted as consumers postpone their product upgrades. We reiterate SELL and reduce our SOTP TP to Rs 14,760 (at 19x FY21 EPS, earlier 21x) as we reduce earnings by 9%/6% over FY20/21. We reiterate SELL as (1) Margin pressures are expected to sustain given weak demand outlook and lower utilization levels (as new capacities come onstream). We are building in margins at 26.3/26.1% over FY20/21E vs. 30.1% in FY19 (2) We expect a delayed recovery in demand as the environment remains challenged. Also, the impact of new product launches is time consuming, with returns expected with a lag (3) The premium to mass OEMs is expected to narrow as profitability is under pressure (4) VECV is impacted by aggressive discounting by the incumbents.
Outlook and Valuations: We expect, EICHER to report 5.3% volume CAGR and 9.3% sales CAGR over FY19-21. The Company is expected to report EPS of Rs699 and Rs770 in FY20E and FY21E respectively. At CMP of Rs16,348 EICHER stock is quoting at PE of 21.2xFY21 earnings. We maintain our SELL rating on the stock with revised price target of Rs15,393 (PER of 20xFY21E earnings).
We are lowering our EPS estimates for FY20/FY21 by 6%/9%, as we cut volumes/margins for both businesses. The stock trades at ~22.3x/19x FY20E/FY21E consol. EPS. We have lowered P/E multiple for RE from 22.5x to 20x to factor in the step-down in its growth trajectory. Maintain Buy.
We interacted with Royal Enfield (RE) dealers across key states to assess demand and consumer sentiments on motorcycle sales. Both remain weak in June, with walk-ins drying up in the past fortnight. Liquidity issues and purchase postponement are key reasons. We expect RE’s June sales to decline 19% YoY to 60,000 units. We expect flat growth in FY20, followed by 5% YoY growth in FY21E. Hence, we cut our EPS by 2-4% over FY20-21E, and we reiterate Sell on Eicher Motors (EIM IN) with a lower SOTP-based TP of INR 16,294.
RE is facing demand weakness for the first time since its renaissance in 2008, as it is in a perfect storm with a weak industry environment, substantial cost inflation and a new competitor. Volumes are likely to remain under pressure until 2QFY20 and then recover gradually. More importantly, we endorse the key initiatives undertaken by RE (RE Studio, price laddering and mass customization), which coupled with complete product portfolio up-gradation with BS6 (could be 2nd inflection point for RE) and ramp- up of 650cc Twins, strengthens the case for a sustainable volumes revival. Valuation are reasonable at ~22.9/19.9x FY20/21E consol. EPS. Maintain Buy with a target price of ~INR23,500 (Mar’21 based SOTP).
we believe margin will come under further pressure. Given price increases, we expect growth rates in low per capita income states to moderate (market share already at 3-5% there vs some high per capita income states stagnating at 5-8%; restricting pace of increase). Thus, despite a realization increase, we expect EPS CAGR of 8% over FY20-21E vs ~a 60% CAGR over FY12-18. We reduce our FY20-21E EPS by 5-6%, owing to margin cuts at RE. We reiterate Sell with a new SOTP-based TP of INR 16,650 from INR 17,197, with 18x (unchanged) FY21E P/E for RE business and 10x (unchanged) FY21E EV/EBITDA for VECV.
RE is witnessing demand weakness for the first time since its renaissance in 2008, as it is in a perfect storm with a weak industry environment, substantial cost inflation and a new competitor. Volumes are likely to remain under pressure until 2QFY20 and then recover gradually. However, we believe BS6 transition would be an inflection point for RE as a completely new improved platform could drive a revival of Classic 350. This coupled with the efforts to build upon the success of 650cc Twins in India and overseas would also support volume growth. Valuations have corrected over last 18 months due to weak growth, however we expect growth to revive from 2HFY20. Maintain our Buy with a TP of Rs INR23,500.
Multiple factors are likely to impact the growth outlook at Eicher. After witnessing robust growth over CY12-FY18, when earnings grew at 46% CAGR, we believe earnings growth will moderate to 10% CAGR over FY19-21E as lifestyle segment growth normalizes in India, competition steps in and export initiatives take time to pay off. We reinstate coverage with a SELL and have a target price of Rs 21,000 based on SOTP. We assign 22x to the RE business – at 25% premium to the mass market OEM’s (vs. 50% in the trailing three years). The lower multiple reflects the moderating growth outlook.
Eicher Motors (EIM) posted Q3FY19 consolidated EBITDA of INR6.8bn, down 4% YoY and 3% ahead of our estimate. The response to the newly launched ‘650cc twins’ has been encouraging (production can be ramped up from 2K currently to ~5K by April 2020). We believe that the brand franchise is intact. However, product fatigue would persist until the current platform is not upgraded for the rest of the products (refer to Geared for acceleration), which will happen along with BSVI transition. All in all, we are lowering FY20E EPS by 11% to INR1,087. Management exuded confidence about its product development capability and the pace of launches with stabilisation of the UK technical centre. Hence we maintain ‘BUY’ with an SoTP-based TP of INR23,781 (from INR25,442), valuing RE at 22x June 2020E core EPS and VECV at PER of 16x and INR2,420 cash per share.
SOURCE: Data from D'Market via Quandl. Intraday data delayed 15 minutes.
DISCLAIMER: Information is provided "as is" and solely for informational purposes, not for trading purposes or advice, and may be delayed. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and FrontPage will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein.