Eicher Motors needs to increase the volume

In such a situation, the results of December quarter (3rd quarter of FY22) were mixed. Eicher’s standalone revenue up 1% year-on-year (YoY) 2,838 crore. The 15% decline in Royal Enfield (RE) motorcycle sales volume was partially offset by a 19% increase in net realization per vehicle on the back of a price hike. Still, net realization is down 5% sequentially, as the share of export volumes declined from 14% in Q2 to an overall 11% decline in Q3. In general, export prices are high, but the festive season in India meant that the company fulfilled more domestic orders.

Overall, earnings before interest, taxes, depreciation and amortization (Ebitda) margin declined by 300 basis points year-on-year to 20.5% due to higher commodity prices and a weaker product mix. One basis point is 0.01%. Sequentially, the EBITDA margin increased slightly. As demand improves, margins can be expected to improve.

Meanwhile, regulatory norms mandating the electrification of high engine capacity models seem far-fetched at the moment. Kumar Rakesh, Senior Automobile and Technology Analyst, BNP Paribas India said, “The risk of EVs in the RE segment is much lower than in the low CC segment. Converting high cc bikes to EVs requires larger battery packs, resulting in Significant price increases.”

That said, the recovery in demand is significant for the stock which has underperformed Nifty Auto over the past year. With vendor additions and semiconductor shortage issues easing, waiting periods are expected to be shorter. The management said that the order book is fine and the new generation Classic 350cc is witnessing high demand in the domestic and export markets. There will be a new launch every quarter, the management reiterated. It should support development.

“RE should be a major beneficiary of the potential revival in Indian 2W demand, especially in urban markets. Analysts at Jefferies India Pvt Ltd in a report said, “It is well positioned to benefit from premiumisation. Exports are another driver. Its exports grew 130% year-on-year in YTD-FY22, accounting for 14% of its total volumes versus 14%.” contributes.” Just 2-6% in FY17-21,” said analysts at Jefferies. In the medium term, however, investors will do well to track the impact of increasing competitive intensity on market share.