Buy Eicher Motors; target Rs 820: Motilal Oswal
Motilal Oswal is bullish on Eicher Motors (EIM) and has recommended buy rating on the stock with a target price of Rs 820 in its February 13, 2013 research report.
February 14, 2013 / 14:15 IST
Motilal Oswal is bullish on Eicher Motors (EIM) and has recommended buy rating on the stock with a target price of Rs 820 in its February 13, 2013 research report.
"EIM's cons. revenue grew 3% YoY (+9.7% QoQ) to INR16.3b (v/s est INR16.8b). EBITDA margin stood at 7.3% (v/s est 8.7%) as standalone margin declined 340bp QoQ on higher other expenditure and staff cost. PAT (after minority) declined 14.8% YoY (+10.3% QoQ) to INR723m (est INR666m). Higher other income and lower tax rate led to higher-than-estimated PAT.Royal Enfield's margins at 11.5% (v/s est 15.4%) were impacted due to higher staff and other cost. While staff cost increased due to higher hiring for new plant, other expenditure rose due to Thunderbird model launch (one-time) and higher power & fuel cost.Despite demand slowdown, margins for CV business improved by 50bp QoQ (-340bp YoY) to 6.3% (est 6.6%) aided by better cost management. EIM indicated that given the expansion mode, on a quarterly basis there might be few aberrations at margin levels. Royal Enfield's demand remains strong, with 6-8 months waiting, despite sharp increase in production.Valuation and view: With several projects commencing in CY13-14 and driving 27% sales CAGR and 34% EBITDA CAGR over CY12-15E, EIM is at an inflection point. Motorcycle business will benefit from capacity expansion, new launches and network expansion. CV subsidiary will benefit from commencement of MDEP and ramp-up in HCVs.We marginally lower by 0.7%/0.4%/0.2% CY13E/CY14E/CY15E EPS factoring margin pressure on Royal Enfield's business due to higher power & fuel cost, partially offset by an upgrade in volumes.The stock trades at 22.2x/15.3x/11.3x CY13E/CY14E/CY15E EPS of INR120/174.8/ 236.2 respectively. Maintain Buy with a two-year target price of INR3,820 (CY15E SOTP)," says Motilal Oswal research eport.Bodies Corporate holding more than 50% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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