Eicher Motors (EIM IN)€¦ · Eicher Commercial Vehicles (VECV) on account of axle norm changes,...
Transcript of 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)
Y/e March Q1FY19 Q1FY18 YoY gr. (%) Q4FY18 FY19E FY18 YoY gr. (%)
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
Y/e March Q1FY19 Q1FY18 YoY gr. (%) Q4FY18 FY19E FY18 YoY gr. (%)
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)
Y/e Mar FY17 FY18 FY19E FY20E
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
Intangibles 289 438 438 438
Net fixed assets 8,728 15,017 17,010 18,133
Tangibles 8,394 14,630 16,624 17,746
Intangibles 335 387 387 387
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
Source: Company Data, PL Research
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
Source: Company Data, PL Research
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
Source: Company Data, PL Research
Key Financial Metrics
Y/e Mar FY17 FY18 FY19E FY20E
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
Source: Company Data, PL Research
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
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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.
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