Eicher Motors - 2QCY12 - In-line with expectations - Dolat Capital

Revenue up 22% YoY, led by 62% YoY volume growth in motorcycles

Eicher Motors reported top-line revenue at Rs.15.9bn, up 22% YoY led by ~8% YoY volume growth in M&HCV. The company sold 11,979 medium and heavy commercial vehicles (M&HCV). It sold 27,244 motorcycles in 2QCY12, up 62% YoY.

Operating margins decline 180bps QoQ to 8.8%

The company's operating margins declined 180bps QoQ to 8.8%. This was mainly led due to higher staff costs and other expenses. Staff costs was in line with expansion plans. The higher incentives to push sales led to higher other expenses.

EBIDTA for the quarter was Rs. 1.4bn, up 11% YoY.

PAT reported at Rs. 760mn, flattish YoY

The company reported its PAT at Rs. 760mn. This was because of lower other income. The EPS for the quarter stood at Rs. 28.2.

View and valuation

Macro headwinds may affect the demand in the commercial vehicle segment. Accordingly, we estimate volume growth of 12% in CY13 in the CV segment. Its demand in the motorcycle segment continues to be strong with a waiting of almost 2-3 months. With supply issues being sorted, we expect this segment to grow 30% YoY. We also believe margins may remain stable at these levels. The stock is currently trading at a P/E of 13.9x CY14E. We recommend Accumulate.

Source : Equity Bulls

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