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Last Updated : Aug 14, 2020 12:38 PM IST | Source: Moneycontrol.com

What should investors do with Eicher Motors after Q1: buy, sell or hold?

Consolidated revenue declined significantly by 65.6 percent YoY to Rs 818.2 crore in the quarter

 
 
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Eicher Motors share price fell in the early trade on August 14, a day after it posted a weak set of numbers for the June quarter.

The company posted a consolidated loss of Rs 55.2 crore for the quarter ended June 2020, which was better than a CNBC-TV18 poll estimate of Rs 290 crore.

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The company had reported a profit of Rs 451.8 crore in the corresponding period last fiscal.

Consolidated revenue declined 65.6 percent YoY to Rs 818.2 crore in the quarter. Hit by lockdown, volumes fell sharply, though the company saw a good demand recovery towards the end of the quarter.

CLSA | Rating: Downgraded to sell from underperform | Target: Cut to Rs 19,000 from Rs 19,500 per share

The company’s operating metrics continue to lag peers, while Q1 miss was largely driven by a lower gross margin.

Unlike peers, the company has not been able to fully pass on BS-VI related costs.

The broking house has cut FY21 EPS by 11 percent but left FY22/23 largely unchanged. The higher-than-expected recovery in Royal Enfield volumes and margin a key upside risk, CNBC-TV18 reported.

Morgan Stanley | Rating: Overweight | Target: Rs 21,073

The company’s EBITDA was lower than estimated due to incentive scheme offered to restart retail sales.

Its bookings are holding at pre-COVID levels, orderbook is at 45,000, while production is a key challenge, reported CNBC-TV18.

Motilal Oswal | Rating: Buy | Target: 24,750

The broking house has upgraded FY21/FY22 EPS estimate by around 6% (for both years) on upgrade volumes for both RE and VECV.

It believes new products would help expand the addressable markets and drive the next phase of growth for RE. Volume recovery, led by new product launches, would drive margin recovery in FY22.

Prabhudas Lilladher | Rating: Accumulate | Target: Rs 22,869

The firm has downgraded the stock to accumulate as recent valuation catch-up at 27x/23x FY22/23 EPS factors in near to medium-term positive.

Structurally it remains positive on key factors such as  RE’s under penetration in key motorcycling states (market share of <4% v/s national average of 6%) and  RE’s monopoly for upgrade options in >300CC segment.

Dolat Capital | Rating: Sell | Target: 20,952

Dolat Capital expects the margin to improve from 2HFY21 due to the benefit of operating leverage and cost control measures. It believes the long-term margin is likely to be in the range of 23-25% as the benefit of operating leverage would be partially offset by launch cost, increasing competitive intensity and reversal in commodity prices.

It retains positive view on the stock due to the pick-up in order-bookings, strong product pipeline and network expansion. However, valuation (28/23x for FY22/23E EPS) looks expensive.

At 0919 hours, Eicher Motors was quoting at Rs 21,302.40, down Rs 368.60, or 1.70 percent on the BSE.
First Published on Aug 14, 2020 09:36 am
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