Edelweiss is bullish on Eicher Motors has recommended buy rating on the stock with a target price of Rs 35731 in its research report dated May 09, 2018.
Edelweiss' research report on Eicher Motors
Eicher Motors’ (EIM) Q4FY18 consolidated EBITDA at INR8.0bn came in line with estimate despite higher-than-expected commodity pressure. Management highlighted that Royal Enfield (RE) demand is buoyant spurred by new variants (refer, Gun Metal Grey: Gunning for growth). Growth in Maharashtra/Karnataka has also picked up in Q4FY18 (versus Q3). Hence, waiting period for key models stands at ~45 days. The company is also expanding presence in low penetration states like Uttar Pradesh, which should bolster growth. RE’s FY19 capacity guidance maintained at 950K; management expects delta in capacity in FY20 as and when Vallam (Phase 2) starts production.
Our ~22% EPS CAGR over FY18 - 20E is driven by strong demand for RE and margin improvement riding scale benefits. Even VECV is focusing on profitable growth and has enhanced market share on account of new launches. We maintain ‘BUY/SO’ with TP of INR35, 713 (30x core FY20E EPS, 17x FY19E VECV EPS and INR 2 , 585 cash/ share). At CMP, the stock trades at FY19E/20E PER of 28.2/23 x
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