Accumulate Eicher Motors; target of Rs 15654: Angel Broking

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26 Aug, 2025 12:21

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Angel Broking's report on Eicher Motors

"Eicher Motors (EML)'s 3QCY2014 results were in line with our estimates on the operating front; however lower other income and higher taxation led to lower than expected profits. EML's revenues grew 31% yoy to Rs 2,275cr. The growth was led by Royal Enfield (robust growth of 79% yoy to Rs 821cr).The commercial vehicle segment (VE Commercial Vehicles [VECV]) revenues grew 14% yoy to Rs 1,454cr, led by recovery in volumes and increase in engine supplies. Operating margins at 13.4% improved 130bp yoy and were in line with our estimates of 13.6%. Royal Enfield's margins at 25% improved sharply by 570bp yoy led by strong operating leverage. VECV margins however declined 260bp yoy to 6.9%, impacted by subdued volumes and higher discounting. However lower other income and higher taxation (tax/PBT at 30.4%) dragged profitability. The net profit at Rs 165cr was lower than our estimate of Rs 188cr."

"The demand for Royal Enfield is likely to remain strong over the next two to three years given the increasing acceptance of leisure biking trend where it has a strong brand image. The demand continues to outstrip supply and EML is constantly ramping up capacity. Further, Royal Enfield is likely to sustain higher margins on back of strong pricing power and benefits of operating leverage. Further, the commercial vehicle segment's profitability would also improve given the uptrend in the commercial vehicle industry and gradual reduction of discounting. EML is likely to witness a robust 61% CAGR in earnings over CY2014-2016, which would be amongst the highest in our automobile universe. EML is one of our preferred mid-cap picks given the robust earnings potential. We assign an Accumulate rating on the stock with a price target of Rs 15,654 (based on 15x CY2016 EV/EBIDTA)", says Angel Broking research report.

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