Reduce Eicher Motors; target of Rs 2500: Dolat Capital

Dolat Capital is bearish on Eicher Motors and has recommended reduce rating on the stock with a target of Rs 2500 in its February 13, 2013 research report.
 
“Eicher Motors reported top-line revenue at Rs 16.5bn, up 5percent YoY led by ~9percent YoY decline in volume growth in M&HCV. The company sold 11,664 medium and heavy commercial vehicles (M&HCV). It sold 32,536 motorcycles in 4QCY12, up 71percent YoY. The company’s operating margins declined 40bps QoQ to 7.1percent. This is the fourth straight decline. The company had reported 10.6percent in Q1. This decline was mainly led due to higher input costs. Discounts continue to be higher to push CV sales. EBIDTA for the quarter was Rs 1.2bn, down 23percent YoY. The company reported its PAT at Rs 727mn. The effective tax rate for the quarter was also down to just 12.1percent. The EPS for the quarter stood at Rs 27.0.”
 
“We introduce our CY14 estimates. We expect volume to grow at a CAGR of ~9percent in CY12-CY14 in the CV segment. Its demand in the motorcycle segment continues to be strong with a waiting of almost 2-3 months. With supply issues being sorted, we expect this segment to grow 20percent YoY. The stock is currently trading at a P/E of 17.0x CY14E. We recommend to book profits at current level and maintain Reduce purely on rich valuations,” says Dolat Capital research report.

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