Eicher Motors Q3 Results Preview: Revenue likely to increase 3-7%, PAT may decline 3-8%

The PAT in the preceding quarter of current financial year stood at Rs 373.2 crore and the revenues were registered at Rs 2,250 crore.

Brokerage Expectations

Kotak Institutional Equities expects a 2.8 percent on-year increase in operating revenues at Rs 2,907 crore which is, on a sequential basis, an increase of 29 percent.

“We expect revenues to increase by 3 percent YoY in Q3FY22 led by 21 percent YoY increase in ASPs (average selling price) due to a richer model mix and price hikes taken over the past few quarters, partly offset by 15 percent YoY decline in volumes,” the brokerage said in its report.

Royal Enfield volumes declined by 15 percent on year due to chip shortage; however, an improvement in chip availability was witnessed in December 2021.

EBITDA (earnings before interest, tax, depreciation and amortisation) is likely to decline 7.1 percent on year to Rs 624 crore from Rs 672 crore during the same quarter last year. On a sequential basis, the EBITDA is likely to jump 33 percent.

“We estimate EBITDA margin to increase by 110 bps QoQ led by 50 bps QoQ increase in gross margins led by price hikes taken during the quarter and decline in precious metal prices and also because of operating leverage benefit,” Kotak said. On a yearly basis, the EBITDA margins may decline by 229 bps due to higher raw material prices and lower volumes.

It may be noted that in the preceding quarter, the company had reported one-time benefit of Rs 40 crore in employee cost pertaining to unvested ESOPs.

The brokerage estimates the PAT to decline 8.2 percent on year to Rs 489 crore and improve 31 percent compared to previous quarter.

Brokerage firm Motilal Oswal pegs the operating revenues at Rs 3,037 crore at a YoY growth of 7.4 percent and a sequential growth of 35 percent.

The net realisations for Royal Enfield are expected to improve by 25 percent on-year to Rs 1,75,000 per unit.

“Availability of semiconductors for ABS (anti-lock braking system) aids recovery in volumes towards end of the reported quarter, Volvo-Eicher Commercial Vehicles (VECV) volumes improve QoQ, but higher discounts and cost inflation to keep margins in check,” Motilal Oswal said in its report.

It expects an EBITDA of Rs 647 crore for the quarter which is a decline of 3.7 percent from last year but an improvement of 38 percent from the previous quarter.

EBITDA margins of 21.3 percent for the quarter may decline by 250 bps from last year but improve 30 bps QoQ.

“Despite operating leverage, QoQ margin improvement is just 30bps as second quarter of current financial year had 140bps benefit from reversal of ESOP charge,” said Motilal Oswal.

It expects the PAT to decline by 3 percent on year to Rs 517 crore. Sequentially, this is a growth of 39 percent.

Axis Securities expects the “revenue to be up 4 percent YoY as 15 percent YoY decline in volumes will be more than offset by higher ASP (+22 percent YoY) while on a QoQ basis, ASP is likely to be down 5 percent on weaker mix (lower exports and spares, higher Bullet volumes).”

Sequentially, it expects the gross margin is likely to be flat due to price hikes taken by the company but operating leverage benefits to drive 200 bps improvements in margin. On a YoY basis, the EBITDA margin may decline 100 bps primarily due to normalisation of other expenses from last year levels.

It expects PAT to remain flat on a YoY basis at Rs 530 crore which is a growth of 43 percent on a QoQ basis.

The Eicher Motors stock closed at Rs 2,598.15, down Rs 42.2 from its previous close at the National Stock Exchange on February 11. The stock is trading lower by 7 percent during the past one year as well as past one month.