Eicher Motors Q4 Review: Higher Exports, Better Chip Supply To Aid Volumes, Say Analysts
The optimism stems as the Royal Enfield maker saw a 16% year-on-year rise in its net profit in the three months ended March 31.
Analysts expect Eicher Motors Ltd.’s volumes to improve from the second quarter, aided by a pickup in exports, new launches and easing chip constraints. That helped the shares of the two-wheeler maker to gain most in three months.
The optimism stems as the maker of Royal Enfield motorcycles saw a 16% year-on-year rise in its net profit in the three months ended March 31. That even as it sold 9% fewer units over the year earlier. Its revenue also increased and margin expanded during the reported quarter.
Shares of Eicher Motors rose more than 6% as of 10:20 a.m. on Monday.
Of the 47 analysts tracking Eicher Motors, 27 have a ‘buy’ rating, 14 suggest a ‘hold’ and six recommend a ‘sell,’ according to Bloomberg data. The average of the 12-month consensus price targets implies an upside of 18%.
Here’s what brokerages have to say about Eicher Motors’ Q4 FY22 results...
Nirmal Bang Institutional Equities
Maintains ‘buy’ with a price target of Rs 2,939 apiece.
New launches and exports to drive volume growth.
Volume declined 10% YoY, largely affected by semiconductor shortages.
Demand is slowly inching up and there is a strong order pipeline.
The company sees chip shortage to persist for some time but has added two more additional suppliers to counter the shortage issue.
Dolat Capital
Recommends ‘buy’ with a price target of Rs 2,924 apiece.
Improving growth and margin prospects.
Gross profit per vehicle increased by 10% QoQ.
Domestic volume to see a sharp uptick from Q2.
New product launches, expansion of the network, and digitization push would be key for Royal Enfield’s growth strategy.
Emkay Global
Maintains ‘buy’ with a price target of Rs 2,910 apiece
Better chip supplies to lead to volume improvement in FY23.
Reduces FY23-24E EPS by 2-3%, largely due to lower margins and profits from associates.
The product pipeline remains strong, and several products are expected.
Share of revenue from international business increased from 10% in FY21 to 17% in FY22, due to marketing efforts and network expansion in Europe, Latin America, and Asia-Pacific regions.
Commodity and freight cost inflation is affecting margin performance, and pass-through is expected with a lag.
Systematix Institutional Equities
Maintains ‘hold’ with a price target of Rs 2,605 apiece.
Q4 FY22 Ebitda surpassed consensus and estimates, as gross margin expanded 290 basis points sequentially.
Network expansion and improved product portfolio in export markets are yielding positive results. Exports now account for 15% of the top line versus 5% a few years back.
The success of the new platforms, coupled with a recovery in industry volumes, could lead to earnings upgrades.
Motilal Oswal
Maintains ‘buy’ with a price target of Rs 2,436 apiece.
Supply-chain issues to ease after Q2 FY23E.
Exports and non-motorcycle revenues are scaling well for Royal Enfield.
Strong gross margin expansion offset by sustained higher other expenses.
With supply-chain issues likely to ease post Q2 FY23E, the continued product portfolio expansion will aid domestic recovery and support ramp-up in exports.
Increases our FY23E/FY24E consolidated EPS by 5.5%/4.0% to reflect better margins for Royal Enfield and volume upgrades for VECV.
Export ramp-up now visible, to fully play out over the next few years.