Eicher Motors, the maker of Royal Enfield motorcycles, is expected to report a 44 percent jump in second quarter earnings, aided by increased sales, price hikes and a drop in raw material costs.
Net profit may climb to Rs 948 crore in the three months ended September from a year earlier, according to the estimates of five brokerages. Revenue may rise by over 15 percent to Rs 4,054 crore. Eicher is scheduled to announce its Q2 results on November 10.
The company’s Ebitda margin is likely to expand by 282 basis points to 26.12 percent in the second quarter.
Brokerages attributed the likely rise in revenue to higher domestic sales, accompanied by price hikes. Sales of Royal Enfield motorcycles rose by 10 percent in Q2 from the previous year. Domestic sales helped offset a fall in exports.
Motilal Oswal and Kotak Securities said the increased sales of Hunter models are set to contribute to the rise in revenue. Kotak expects a 7 percent on-year increase in the average sale price per vehicle due to the price increases carried out over the past year.
Margin expansion
Lower raw material costs, the price increases, a favourable product mix and a benign currency are attributed as the reasons for the expected rise in the EBITDA margin despite the lower export volumes.
“We estimate EBITDA margin to improve by 30 bps qoq in 2QFY24, led by (1) RM tailwinds and (2) price increases; partly offset by (1) lower export mix and (2) higher advertisement spends due to the launch of Bullet 350,” Kotak Securities said.
Prabhudas Lilladher said margins would rise due to “operating leverage, inventorisation benefits, lower commodity costs and price hikes.”
Brokerages expect the commercial vehicle margins to expand for Volvo Eicher Commercial Vehicles (VECV), the joint venture between Volvo Group and Eicher Motors.
“VECV margin is likely to improve YoY/QoQ led by higher CV volumes and moderating discounts,” Motilal Oswal said.
“We expect VECV to report EBITDA margins of 8.3% in 2QFY24 versus 7.8% in 1QFY24 due to RM tailwinds.” Kotak Securities added.
The Eicher Motors stock has barely changed since July, falling 0.17 percent in the past four months. It has underperformed the BSE Auto index, which has returned 6.9 percent during the same period.
At 1:30 pm on November 9, the stock was trading at Rs 3566.2, marginally up by 0.6 percent
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