ICICI Direct recommended hold rating on Eicher Motors with a target price of Rs 19000 in its research report dated May 13, 2019.
ICICI Direct's research report on Eicher Motors
Eicher Motors reported a disappointing Q4FY19 performance. Consolidated revenues were at Rs 2,500 crore (down 1.2% YoY). ASPs for Royal Enfield (RE) were at Rs 1.25 lakh/unit, up 12.9% YoY while sales volumes were at 1.96 lakh units, down 13.5% YoY. EBITDA came in at Rs 685 crore with margins at 27.4% (down 164 bps QoQ). Consequent consolidated PAT was at Rs 545 crore. Eicher’ share of profit from VE-CV JV was at Rs 75.5 crore.
However, in the long term, with premiumisation trend gaining pace, RE’s aggressive foray into international markets coupled with encouraging response received by the “650 twins”, we maintain our HOLD rating on the stock. Sales, EBITDA & PAT are expected to grow at a CAGR of 17.2%, 12.9% & 13.5%, respectively, in FY19-21E. We value Eicher at Rs 19,000 using SOTP valuation technique, implying a P/E multiple of 18x on FY21E EPS.
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