Accumulate Eicher Motors; target of Rs 2598: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Eicher Motors

EIM consol results exceeded our estimates as Revenue/EBITDA/PAT were higher by 4%/22%/10%. This was led by, 1) better margins at RE at 22% (PLe 18.7%, -260bp YoY) and VECV at 6.9% (PLe 5%, +150bp YoY). We expect ~50bp contraction in margins in 2H as higher RM cost will be partially diluted by operating leverage and cost control initiatives. Structurally we remain positive on key factors such as 1) RE’s under penetration in key motorcycling states (market share of 300CC segment and 3) favorable product cycle after a gap of ~8 years in 350cc segment. We raise FY21/22/23 consol EPS by 3-6% as we upgrade volumes by 2-3% and healthy operating performance at VECV.

Outlook

Maintain Accumulate with revised SoTP price target of Rs2,598 (v/s Rs2,290) as we value stock at S/A business at 25x (in line with 10 year LPA, unchanged) and VECV at CV upcycle multiple at 10x EV/EBITDA (v/s 9x) roll forwarded to FY23 consol EPS (v/s Sep-22).

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