eicher motors (eim in)€¦ · eicher commercial vehicles (vecv) on account of axle norm changes,...

August 9, 2018 1

Rating: ACCUMULATE | CMP: Rs27,439 | TP: Rs30,296

RE available on shelf!

Eicher Motors’ (EIM) Q1FY19 consolidated operating performance was

marginally ahead of expectations, wherein revenue growth was at ~27% YoY

to Rs25.5bn (PLe: Rs25.4bn), with volumes growing 23.5% YoY (of which, RE

volumes were higher 22.5% YoY and VECV volumes grew a strong 40% YoY)

and EBITDA margin came in at 31.8%, up 80bps YoY and 30bps QoQ (PLe:

31.1%). This was mainly on account of gross margins improving 130bps YoY

/ down 10bps QoQ, while staff costs as a % of sales rose 70bps YoY and other

expenses as a % of sales dipped 10bps YoY. Consol EBITDA grew ~30% YoY

/ 2% QoQ to Rs8.1bn. Share profit of JVs was higher YoY at Rs643mn, up

~157% YoY but lower 33% QoQ (below PLe: Rs1bn). With lower non-operating

income (down 23% YoY), higher depreciation provision as well as higher tax

rate, consolidated net profit for the quarter stood at Rs5.8bn, up ~25% YoY

(below PLe of Rs6.4bn).

Standalone performance: With healthy volume growth of 22.5% YoY to ~225K

units (down 1% QoQ), total income grew 27.3% YoY to Rs25.5bn (where

realisations improved ~4% YoY). EBITDA margin came in at 32.3%, higher 90bps

YoY, flat QoQ (PLe: 31%). Absolute EBITDA grew 31% YoY to Rs8.2bn. Net profit

for the quarter stood at Rs5.9bn, up 19.6% YoY (PLe: Rs5.4bn).

Key con-call takeaways: (1) Waiting period on most standard RE models has

come down; although waiting on premium variants like gunmetal grey for 350cc,

Thunderbird X is still high (2) Inventory level is currently at 10-11 days (3) The new

twins are expected to be launched by Nov’18 in India and should be launched in all

important markets by FY19 end (4) The management expects high demand for the

new twins from the states of Kerala, Punjab, Tamil Nadu and Goa (5) Karnataka

and Maharashtra markets for RE are now expected to grow in line with industry (6)

With waiting period lowering, the company is now able to participate in the wedding

season demand in UP & Bihar (7) Production guidance for the fiscal is maintained

at 950K units

Valuation & view: With the “Classic 350” being readily available or at a short notice

and majority of the network expansion already in place, we don’t expect RE to be

continuing to be immune to the overall domestic motorcycle demand scenario. The

increasing shift towards the premium variants of the 350cc and launch of new 650cc

twins give us some comfort and could positively impact margins and volumes going

forward. The Vallam Vadagam facility for RE is expected to reach peak capacity at

9.5L units per annum by the end of the current fiscal. The company is increasingly

emphasising on expanding its presence in the international markets, with

developing markets like Thailand and Indonesia expected to deliver results in the

near term. Over the short term there could be some demand pressure for Volvo

Eicher Commercial Vehicles (VECV) on account of axle norm changes, in the

longer run we expect CV demand to pick up . We maintain ‘Accumulate’ with a

target price of Rs30,296. At CMP, the stock trades at 28.7x FY19E and 25.3x

FY20E consol EPS.

Eicher Motors (EIM IN)

August 9, 2018

Q1FY19 Result Update

☑ Change in Estimates | ☑ Target | Reco

Change in Estimates

Current Previous

FY19E FY20E FY19E FY20E

Rating ACCUMULATE ACCUMULATE

Target Price 30,296 33,516

Sales (Rs. m) 104,644 117,603 108,419 123,906

% Chng. (3.5) (5.1)

EBITDA (Rs. m) 33,576 38,096 35,136 40,506

% Chng. (4.4) (5.9)

EPS (Rs.) 955.4 1,083.4 976.6 1,119.8

% Chng. (2.2) (3.3)

Key Financials

FY17 FY18 FY19E FY20E

Sales (Rs. m) 70,334 89,650 104,644 117,603

EBITDA (Rs. m) 21,740 28,076 33,576 38,096

Margin (%) 30.9 31.3 32.1 32.4

PAT (Rs. m) 17,131 21,797 26,043 29,532

EPS (Rs.) 629.6 799.6 955.4 1,083.4

Gr. (%) (19.9) 27.0 19.5 13.4

DPS (Rs.) 99.9 19.8 131.8 158.1

Yield (%) 0.4 0.1 0.5 0.6

RoE (%) 38.1 35.2 32.7 29.9

RoCE (%) 44.2 40.9 37.7 34.1

EV/Sales (x) 10.5 8.2 6.9 6.1

EV/EBITDA (x) 34.0 26.0 21.5 18.7

PE (x) 43.6 34.3 28.7 25.3

P/BV (x) 14.0 10.6 8.4 6.9

Key Data EICH.BO | EIM IN

52-W High / Low Rs.33,484 / Rs.26,000

Sensex / Nifty 38,024 / 11,471

Market Cap Rs.748bn/ $ 10,901m

Shares Outstanding 27m

3M Avg. Daily Value Rs.2565.84m

Shareholding Pattern (%)

Promoter’s 50.50

Foreign 31.10

Domestic Institution 5.81

Public & Others 12.59

Promoter Pledge (Rs bn) -

Stock Performance (%)

1M 6M 12M

Absolute (0.7) (1.1) (12.9)

Relative (6.2) (11.6) (27.1)

Saksham Kaushal

[email protected] | 91-22-66322235

Poorvi Banka

[email protected] | 91-22-66322426

Eicher Motors

August 9, 2018 2

Q1FY19 Result Overview - Consolidated (Rs m)

Y/e March Q1FY19 Q1FY18 YoY gr. (%) Q4FY18 FY19E FY18 YoY gr. (%)

Net Revenues 25,478 20,006 27.3 25,280 104,637 89,650 16.7

Raw Materials 13,115 10,573 24.0 13,001 55,735 46,435 20.0

% of Net Sales 51.5 52.8 51.4 53.3 51.8

Personnel 1,709 1,206 41.7 1,540 6,183 5,569 11.0

% of Net Sales 6.7 6.0 6.1 5.9 6.2

Manufacturing & Other Exp 2,558 2,021 26.6 2,767 9,149 9,569 (4.4)

% of Net Sales 10.0 10.1 10.9 8.7 10.7

Total Expenditure 17,382 13,799 26.0 17,308 71,068 61,573 15.4

EBITDA 8,096 6,207 30.4 7,972 33,570 28,076 19.6

EBITDA Margin (%) 31.8 31.0 31.5 32.1 31.3

Depreciation 702 452 55.1 640 3,007 2,233 34.6

EBIT 7,395 5,755 28.5 7,332 30,563 25,843 18.3

Interest Expenses 15 11 36.6 14 35 53 (33.7)

Non-operating income 596 777 (23.3) 850 3,391 2,801 21.1

PBT 7,975 6,521 22.3 8,168 33,918 28,591 18.6

Tax-Total 2,856 2,175 31.3 2,645 11,217 9,359 19.8

Tax Rate (%) - Total 35.8 33.4 32.4 33.1 32.7

Reported PAT 5,119 4,346 17.8 5,523 22,702 19,232 18.0

Share of profit 643 250 156.7 963 2,950 2,339

Profit after MI 5,762 4,596 25.4 6,486 25,652 21,571 18.9

Adj. PAT 5,762 4,596 25.4 6,486 25,652 21,571 18.9

Source: Company, PL

Q1FY19 Result Overview - Standalone (Rs m)


Net Revenues 25,449 19,999 27.3 25,298 104,728 89,575 16.9

Raw Materials 13,097 10,591 23.7 12,989 55,362 46,391 19.3

% of Net Sales 51.5 53.0 51.3 52.9 51.8

Personnel 1,653 1,160 42.5 1,436 5,972 5,311 12.4

% of Net Sales 6.5 5.8 5.7 5.7 5.9

Manufacturing & Other Exp 2,477 1,971 25.7 2,703 9,007 9,341 (3.6)

% of Net Sales 9.7 9.9 10.7 8.6 10.4

Total Expenditure 17,227 13,722 25.5 17,128 70,340 61,043 15.2

EBITDA 8,222 6,278 31.0 8,170 34,388 28,532 20.5

EBITDA Margin (%) 32.3 31.4 32.3 32.8 31.9

Depreciation 698 450 55.1 637 3,002 2,223 35.0

EBIT 7,524 5,827 29.1 7,533 31,387 26,309 19.3

Interest Expenses 7 7 9.1 7 30 30 0.0

Non-operating income 1,260 1,294 (2.7) 848 3,391 3,324 2.0

Extraordinary Expenses - - - - - 3,120 NA

PBT 8,776 7,115 23.3 8,375 34,747 26,483 31.2

Tax-Total 2,864 2,172 31.9 2,653 11,324 9,354 21.1

Tax Rate (%) - Total 32.6 30.5 31.7 32.6 35.3

Reported PAT 5,912 4,943 19.6 5,721 23,423 17,129 36.7

Adj. PAT 5,912 4,943 19.6 5,721 23,423 19,781 18.4

Source: Company, PL

Eicher Motors

August 9, 2018 3

Operating Metrics


Sales Volume (nos) 225,361 183,998 22.5 227,042 923,055 820,493 12.5

Net Realisation/Vehicle 112,926 108,691 3.9 111,423 113,458 109,172 3.9

Material cost / vehicle 58,117 57,559 1.0 57,208 59,976 56,540 6.1

Gross Profit / vehicle 54,809 51,132 7.2 54,215 53,482 52,632 1.6

Employee cost /vehicle 7,336 6,303 16.4 6,326 6,469 6,473 (0.1)

Other expenses / vehicle 10,989 10,712 2.6 11,904 9,757 11,385 (14.3)

EBITDA/vehicle 36,484 34,117 6.9 35,985 37,255 34,774 7.1

Net Profit/vehicle 26,234 26,866 (2.4) 25,198 25,376 24,109 5.3

Source: Company, PL

Eicher Motors

August 9, 2018 4

Financials

Income Statement (Rs m)

Y/e Mar FY17 FY18 FY19E FY20E

Net Revenues 70,334 89,650 104,644 117,603

YoY gr. (%) 0.9 27.5 16.7 12.4

Cost of Goods Sold 37,045 46,435 55,735 62,779

Gross Profit 33,289 43,215 48,908 54,823

Margin (%) 47.3 48.2 46.7 46.6

Employee Cost 4,263 5,737 6,183 6,802

Other Expenses 7,287 9,402 9,149 9,926

EBITDA 21,740 28,076 33,576 38,096

YoY gr. (%) (12.6) 29.1 19.6 13.5

Margin (%) 30.9 31.3 32.1 32.4

Depreciation and Amortization 1,538 2,233 3,007 3,878

EBIT 20,201 25,843 30,569 34,218

Margin (%) 28.7 28.8 29.2 29.1

Net Interest 36 53 35 35

Other Income 2,273 2,801 3,391 3,459

Profit Before Tax 22,439 28,591 33,925 37,641

Margin (%) 31.9 31.9 32.4 32.0

Total Tax 7,203 9,359 11,217 12,445

Effective tax rate (%) 32.1 32.7 33.1 33.1

Profit after tax 15,236 19,232 22,708 25,197

Minority interest - - - -

Share Profit from Associate 1,895 2,566 3,335 4,336

Adjusted PAT 17,131 21,797 26,043 29,532

YoY gr. (%) (19.8) 27.2 19.5 13.4

Margin (%) 24.4 24.3 24.9 25.1

Extra Ord. Income / (Exp) - - - -

Reported PAT 17,131 21,797 26,043 29,532

YoY gr. (%) (19.8) 27.2 19.5 13.4

Margin (%) 24.4 24.3 24.9 25.1

Other Comprehensive Income - - - -

Total Comprehensive Income 17,131 21,797 26,043 29,532

Equity Shares O/s (m) 27 27 27 27

EPS (Rs) 629.6 799.6 955.4 1,083.4

Source: Company Data, PL Research

Balance Sheet Abstract (Rs m)


Non-Current Assets

Gross Block 12,951 21,443 26,443 31,443

Tangibles 12,328 20,619 25,619 30,619

Intangibles 624 824 824 824

Acc: Dep / Amortization 4,223 6,426 9,433 13,311

Tangibles 3,934 5,989 8,996 12,873


Net fixed assets 8,728 15,017 17,010 18,133

Tangibles 8,394 14,630 16,624 17,746


Capital Work In Progress 3,738 3,332 3,332 3,332

Goodwill - - - -

Non-Current Investments 41,200 49,700 59,900 70,100

Net Deferred tax assets (778) (1,421) (1,421) (1,421)

Other Non-Current Assets 2,616 1,823 1,923 2,023

Current Assets

Investments 8,836 6,334 7,334 8,334

Inventories 3,359 3,946 4,607 5,178

Trade receivables 500 680 794 892

Cash & Bank Balance 251 12,120 18,720 27,679

Other Current Assets 772 1,956 1,956 1,956

Total Assets 70,223 95,426 116,194 138,344

Equity

Equity Share Capital 272 273 273 273

Other Equity 53,179 70,028 88,548 108,720

Total Networth 53,451 70,301 88,821 108,992

Non-Current Liabilities

Long Term borrowings - - - -

Provisions 261 291 316 341

Other non current liabilities 232 468 478 488

Current Liabilities

ST Debt / Current of LT Debt 1,119 1,508 1,508 1,508

Trade payables 7,653 11,719 13,681 15,375

Other current liabilities 6,526 9,425 9,675 9,925

Total Equity & Liabilities 70,223 95,426 116,194 138,344


Eicher Motors

August 9, 2018 5

Cash Flow (Rs m)

Y/e Mar FY17 FY18 FY19E FY20E Year

PBT 22,439 28,591 33,925 37,641

Add. Depreciation 1,538 2,233 3,007 3,878

Add. Interest 36 53 35 35

Less Financial Other Income 2,273 2,801 3,391 3,459

Add. Other 4,851 (1,752) - -

Op. profit before WC changes 28,864 29,125 36,967 41,555

Net Changes-WC 1,141 5,807 1,073 910

Direct tax (6,784) (8,716) (11,217) (12,445)

Net cash from Op. activities 23,221 26,216 26,823 30,020

Capital expenditures (5,118) (8,116) (5,000) (5,000)

Interest / Dividend Income - - - -

Others (16,035) (5,937) (11,000) (11,000)

Net Cash from Invt. activities (21,152) (14,053) (16,000) (16,000)

Issue of share cap. / premium 1 1 - -

Debt changes 893 390 - -

Dividend paid (3,168) (630) (4,188) (5,025)

Interest paid (36) (53) (35) (35)

Others - - - -

Net cash from Fin. activities (2,311) (293) (4,223) (5,061)

Net change in cash (242) 11,870 6,600 8,959

Free Cash Flow 18,104 18,099 21,823 25,020


Quarterly Financials (Rs m)

Y/e Mar Q2FY18 Q3FY18 Q4FY18 Q1FY19

Net Revenue 21,673 22,690 25,280 25,478

YoY gr. (%) 23.5 23.7 33.9 27.3

Raw Material Expenses 11,285 11,576 13,001 13,115

Gross Profit 10,388 11,114 12,279 12,363

Margin (%) 47.9 49.0 48.6 48.5

EBITDA 6,825 7,072 7,972 8,096

YoY gr. (%) 10.0 3.6 12.7 1.6

Margin (%) 31.5 31.2 31.5 31.8

Depreciation / Depletion 492 649 640 702

EBIT 6,334 6,423 7,332 7,395

Margin (%) 29.2 28.3 29.0 29.0

Net Interest 13 16 14 15

Other Income 699 475 850 596

Profit before Tax 7,020 6,882 8,168 7,975

Margin (%) 32.4 30.3 32.3 31.3

Total Tax 2,243 2,296 2,645 2,856

Effective tax rate (%) 32.0 33.4 32.4 35.8

Profit after Tax 4,777 4,586 5,523 5,119

Minority interest - - - -

Share Profit from Associates 403 723 963 643

Adjusted PAT 5,180 5,309 6,486 5,762

YoY gr. (%) 25.4 27.0 38.1 25.4

Margin (%) 23.9 23.4 25.7 22.6

Extra Ord. Income / (Exp) - - - -

Reported PAT 5,180 5,309 6,486 5,762

YoY gr. (%) 25.4 27.0 38.1 25.4

Margin (%) 23.9 23.4 25.7 22.6

Other Comprehensive Income - - - -

Total Comprehensive Income 5,180 5,309 6,486 5,762

Avg. Shares O/s (m) 2,144 2,144 2,144 2,144

EPS (Rs) 2.4 2.5 3.0 2.7


Key Financial Metrics


Per Share(Rs)

EPS 629.6 799.6 955.4 1,083.4

CEPS 686.1 881.5 1,065.7 1,225.6

BVPS 1,964.4 2,578.9 3,258.3 3,998.2

FCF 665.3 664.0 800.5 917.8

DPS 99.9 19.8 131.8 158.1

Return Ratio(%)

RoCE 44.2 40.9 37.7 34.1

ROIC 37.5 38.9 37.2 35.6

RoE 38.1 35.2 32.7 29.9

Balance Sheet

Net Debt : Equity (x) (0.1) (0.2) (0.3) (0.3)

Net Working Capital (Days) (20) (29) (29) (29)

Valuation(x)

PER 43.6 34.3 28.7 25.3

P/B 14.0 10.6 8.4 6.9

P/CEPS 670.5 861.4 1,041.4 1,197.7

EV/EBITDA 34.0 26.0 21.5 18.7

EV/Sales 10.5 8.2 6.9 6.1

Dividend Yield (%) 0.4 0.1 0.5 0.6


Eicher Motors

August 9, 2018 6

Price Chart Recommendation History

No. Date Rating TP (Rs.) Share Price (Rs.)

1 9-Oct-17 Accumulate 32,342 31,538

2 14-Nov-17 Accumulate 33,465 30,083

3 10-Jan-18 Accumulate 33,465 28,594

4 8-Feb-18 Accumulate 32,727 27,568

5 13-Apr-18 Accumulate 32,727 31,342

6 9-May-18 Accumulate 33,516 30,305

7 11-Jun-18 Accumulate 33,516 30,305

8 10-Jul-18 Accumulate 33,516 28,079

Analyst Coverage Universe

Sr. No. CompanyName Rating TP (Rs) Share Price (Rs)

1 Ashok Leyland BUY 146 111

2 Atul Auto Accumulate 397 394

3 Bajaj Auto Reduce 2,573 2,684

4 Bharat Forge Accumulate 760 620

5 CEAT Accumulate 1,451 1,324

6 Eicher Motors Accumulate 33,516 28,079

7 Exide Industries Accumulate 282 271

8 Hero Motocorp Accumulate 3,824 3,110

9 Mahindra & Mahindra BUY 1,075 927

10 Maruti Suzuki BUY 10,705 9,396

11 Motherson Sumi Systems Accumulate 373 293

12 Tata Motors BUY 352 264

13 TVS Motors Accumulate 605 549

14 Wabco India Accumulate 7,111 6,698

PL’s Recommendation Nomenclature (Absolute Performance)

Buy : > 15%

Accumulate : 5% to 15%

Hold : +5% to -5%

Reduce : -5% to -15%

Sell : < -15%

Not Rated (NR) : No specific call on the stock

Under Review (UR) : Rating likely to change shortly

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Eicher Motors

August 9, 2018 7

ANALYST CERTIFICATION

(Indian Clients)

We/I, Mr. Saksham Kaushal- BSc Accounting & Finance (Hons.), Ms. Poorvi Banka- MSc. Finance Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

(US Clients)

The research analysts, with respect to each issuer and its securities covered by them in this research report, certify that: All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers and their securities; and No part of his or her or their compensation was, is or will be directly related to the specific recommendation or views expressed in this research report.

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eicher motors (eim in)€¦ · eicher commercial vehicles (vecv) on account of axle norm changes,...

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