Hold Eicher Motors; target of Rs 1915: Emkay

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Hold Eicher Motors; target of Rs 1915: Emkay

Emkay Global Financial Services has recommended hold rating on Eicher Motors with a target of Rs 1915, in its February 13, 2012 research report.

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Emkay Global Financial Services has recommended hold rating on Eicher Motors with a target of Rs 1915, in its February 13, 2012 research report.

"Eicher Motors, product mix continues to improve with heavy duty (>12 T) M&HCV goods segment seeing strong momentum. Average run rate improved to ~748 units per month in Q4 vs ~668 units in Q3. Market share improved sequentially by ~70 bps to 3.9% during Q4CY11. Royal Enfield operates at full capacity and maintains a run rate of ~7,000 units per month. Volvo trucks volumes remained lackluster declining 26% YoY at 249 units."

"Net sales at Rs 15.8bn was ~3% above our est. of Rs 15.2bn. This was primarily led by higher than expected top line in VECV at Rs 14bn vs our est. of Rs 13.5bn. Standalone revenues at Rs 1.7bn was in line with est. Consolidated EBIDTA at Rs 1.5 bn (our est. of Rs 1.6bn) was impacted by lower than expected operating performance in the standalone business. Standalone EBITDA at Rs 158 mn was significantly below our est. of Rs 230 mn. Cost pressure was seen across line items in standalone business. VECV EBITDA of Rs 1.4 bn was in line with est. Consolidated APAT at Rs 854 mn was in line with our est.. Higher than expected other income and lower effective tax rate benefitted earnings. Other income was at Rs 429mn vs our est. of Rs 300mn. Effective tax rate of 22.6% was lower than our est. of 25%. Depreciation expense of Rs 170mn was in line with our est."

"At CMP of Rs 1,705, the stock trades at PER of 12.4x/10.6x and EV/EBIDTA of 7.3x/5.7x our CY12 and CY13 estimates respectively. We downgrade our rating on the stock to HOLD from ACCUMULATE as we see risk to our volume estimates due to capacity concerns/macro environment," says Emkay Global Financial Services research report. 

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