Accumulate Eicher Motors; target of Rs 4100: Prabhudas Lilladher

Prabhudas Lilladher's research report on Eicher Motors

Eicher Motors’ (EIM) 3QFY24 consol. EBITDA margin at 26.1% came ~20bps above consensus and above PLe (23.5%); margins contracted ~30bps QoQ led by higher other opex given multiple launches and higher marketing and advertising spends in 3Q. However, good stride made on the RM side was a surprise to us. On CV side, VECV would benefit from profitable growth as peers work towards lowering discounts in the industry. Increase in competition has marred EIM’s medium term growth prospects and could chip away from RE’s growth. Domestic volume growth in 9MFY24 was lower than 125cc+ motorcycle industry and exports volume is expected to remain weak over next 6 months. However, (1) ASP growth from new launches, (2) focus on growing export mix, (3) higher mix of merchandise and spare should aid both revenue and margin. We roll over by one quarter and value the stock at 23x Mar-26E standalone EPS and 11x EV/EBITDA for VECV in-line with Ashok Leyland. Upgrade to ‘Accumulate’ rating.

Outlook

We increase our FY24/FY25/FY26 consol. EPS estimates by 7%/4%/3% to factor in 3Q beat along with management commentary and upgrade the rating to ‘Accumulate’ from ‘Hold’ with revised SoTP based TP of Rs 4,100 (previous Rs. 3,870).

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