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Informist, Tuesday, Jul 16, 2024

 

By Darshan Nakhwa 

 

MUMBAI – Eicher Motors Ltd is expected to report healthy year-on-year growth in key earnings metrics for the June quarter, estimates by brokerage firms show. The growth will be primarily driven by higher average selling prices--led by price hikes--and moderation in commodity costs, which will help offset the impact of marginally lower volumes of Royal Enfield and Volvo Eicher Commercial Vehicles. 

 

The company's consolidated net profit for Apr-Jun is expected to rise nearly 10% on year to 10.09 bln rupees, and net sales are seen up slightly over 6% on year at 42.35 bln rupees, according to the average of the estimates of nine brokerage firms. Among the estimates, the highest projection for the company's bottomline is 10.62 bln rupees and the lowest is 9.43 bln rupees. The range for the topline is 43.21-41.74 bln rupees.

 

According to the average of the estimates of eight brokerage firms, Eicher Motors' cash operating profit, or earnings before interest, tax, depreciation, and amortisation, is seen at 11.25 bln rupees in the June quarter, up 10.2% from 10.21 bln rupees in the year-ago period. The highest and lowest estimates for EBITDA for the quarter are 11.64 bln rupees and 10.98 bln rupees, respectively.

 

On the EBITDA margin front, the company is expected to report an expansion on a year-on-year basis, led by a richer product mix, a higher average selling price, and lower input costs. Its margin is seen expanding by 100 basis points on year to 26.6%, according to the average of seven estimates.

 

The brokerages were divided over the company's performance on the EBITDA margin front, on a sequential basis. Motilal Oswal Financial Services, Kotak Institutional Equities, YES Securities, and Emkay Global Financial Services expect the margin to contract on quarter by 20-30 basis points on account of lower volumes of high-margin commercial vehicles. However, Elara Securities (India), Prabhudas Lilladher, and Sharekhan expect the company's margin to expand by 10-100 bps on quarter. These brokerages did not give any commentary to justify the expected sequential margin expansion. 

 

In Apr-Jun, prices of aluminium, copper, lead, and rubber rose 6-16% on quarter. However, prices of domestic and Chinese cold rolled coil steel were down 1.2% and 8.1%, respectively. Meanwhile, on a year-on-year basis, prices of domestic cold rolled coil steel, aluminium, lead, copper, and rubber declined 2-31%, according to data from Kotak Institutional Equities. 

 

On a sequential basis, the New Delhi-based automaker is likely to report a decline in key earnings metrics due to lower volumes and an increase in commodity prices. While its bottomline is expected to decline nearly 6% on quarter, the EBITDA and revenue are seen down 0.4% and 0.5%, respectively. 

 

Eicher Motors sells two-wheelers under the Royal Enfield brand, and commercial vehicles under the Eicher and Volvo brands in India under a joint venture with the Volvo Group. In Apr-Jun, the company's overall despatches--including two-wheelers and commercial vehicles--were down both annually and sequentially. It sold a total of 245,722 units in the June quarter, compared to 247,277 units in the year-ago period and 253,405 units in Jan-Mar. 

 

In the June quarter, Royal Enfield volumes were down both on year and sequentially by 0.7% at 226,020 units. By comparison, the company's commercial vehicle sales were up 0.7% on year, but down just over 23% on quarter at 19,702 units in Apr-Jun. 

 

Eicher Motors has not yet announced the date for its Apr-Jun earnings. According to brokerages, the company's outlook on demand and timeline of new launches will be some of the key things to watch out for.

 

Eicher Motors's stock has gained nearly 5% since its March quarter earnings. At 1158 IST, shares of the company were 0.7% higher at 4,915 rupees on the National Stock Exchange.

 

Following are the Apr-Jun earnings estimates for Eicher Motors, in mln rupees, from nine brokerage firms:

 

Brokerage firm	Net sales	Net profit	EBITDA
Elara Securities (India)	42,117	9,688	11,582
Emkay Global Financial Services	42,463	10,213	11,168
ICICI Securities	41,736	10,620	11,228
Kotak Institutional Equities	41,953	9,780	10,998
Motilal Oswal Financial Services	42,501	10,094	11,180
Nuvama Wealth Management	42,733	10,341	11,253
Prabhudas Lilladher	43,213	10,575	11,646
Sharekhan	42,670	10,060	----
YES Securities (India)	41,780	9,427	10,975
Average	42,352	10,089	11,254

 

End

 

Edited by Avishek Dutta

 

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