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Eicher Motors gets going as fourth-quarter results beat expectations


Eicher Motors Ltd was the best performer in the Nifty 50 index on Friday as its shares rose more than 5% after better-than-expected earnings in the March quarter (Q4FY23). A combination of factors contributed to the company’s success, including the full benefit of a price increase in November for Royal Enfield (RE) models and an increase in export share.

The company’s fourth-quarter earnings were boosted by a sequential increase in average selling price of 8% on a stand-alone basis, driven by a favorable product mix. In addition, a 90 basis point raw material cost benefit helped the company’s fourth quarter Ebitda (earnings before interest, taxes, depreciation and amortization) reach a multi-quarter high of 945 crore. This figure beat Kotak Institutional Equities’ estimate by 7%. One basis point is 0.01%.

During the earnings call, Eicher reported strong demand for RE models in domestic markets, but overall demand for two-wheelers has yet to pick up. Nevertheless, RE recorded its highest sales volume ever in FY23, with 834,895 units sold, an increase of 32% year-over-year. The share of exports was 12% in FY23 and Eicher wants to expand further in this area, which should improve margins. In addition, the company increased the prices of some RE models in May.

But while Eicher’s performance is promising, the company faces increasing competition in the domestic market. The impact of new launches from Bajaj-Triumph and Hero-Harley collaborations on RE’s market share remains uncertain.

“We believe this wave of competition may be fiercer than previous launches by Jawa in 2018 and Honda in 2020, as Harley and Triumph have, in our view, better brand recognition in India,” Jefferies India analysts said in a May 11 report. According to the brokerage firm, RE’s FY23 market share was 32% in the 125cc+ bike segment.

Taking into account the potential risk from new competitors, analysts at Motilal Oswal Financial Services downgraded Eicher Motors’ stock rating from “Buy” to “Neutral.”

Meanwhile, Eicher Motors’ commercial vehicle segment, managed by VE Commercial Vehicles Ltd, a joint venture with the Volvo Group, has a strong foundation. The company expects double-digit volume growth in the medium- and heavy-duty vehicle industry for FY24.

Despite the current rise in Eicher Motors share price, the stock remains almost 7% below its 52-week high 3,889.65 per share, realized in November.

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Joanna Swanson

Joanna Swanson is Europe correspondent at the Thomson Reuters Foundation based in Brussels covering politics, culture, business, climate change, society, economies and inclusive tech. With specific focus in breaking news, she has covered some of the world's most significant stories.