Eicher Motors - 'RE' positioned to grow as capacity revs up... - ICICIdirect

Eicher Motors (EML) reported its Q4CY12 results that were ahead of our estimates on the topline front. However, the performance was muted on the margins front. Operating margins at 7.1% were ~40 bps lower QoQ while PAT at Rs. 72.7 crore was marginally lower than our estimate. The performance was better than the headline numbers suggest.

VECV has continued to gain market share in a tough demand scenario for the CV segment. Royal Enfield (RE) sales have also been the highest ever in its history for the quarter. We continue to like the RE franchise and believe demand remains robust. With new product launches and capacity enhancement, high growth seems sustainable. We feel that the CV segment is near its cyclical bottom and volume uptick coupled with steady market share gains should help VECV post better numbers in CY13, CY14E.

We have changed our rating on the stock to BUY and valued it on an SOTP basis to arrive at a target price of Rs. 3065.

Source : Equity Bulls

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