Eicher Motors Ltd's Q1FY20 consolidated net profit declines 21.6% yoy to Rs451.8cr : Misses Estimates

The company’s consolidated revenue stood at Rs2,381.9cr, down 6.5% yoy and 4.7% qoq.

July 31, 2019 8:13 IST | India Infoline Research Team

Eicher Motors Ltd Q1FY20

Consolidated Results Q1FY20: (Rs. in cr)

Q1FY20 YoY (%)
Revenue 2,381.9 [6.5]
EBITDA 614.5 [24.1]
EBITDA Margin (%) 25.8 [598]
Net Profit  451.8 [21.6]
***EBITDA margin change is bps
Eicher Motors Ltd (EML) reported weak set of consolidated numbers in Q1FY20, lower than expectations on profitability fronts. Consolidated revenue for the quarter stood at Rs2,381.9cr, down 6.5% yoy and 4.7% qoq (in-line with estimate). Due to negative operating leverage, EBITDA declined 24.1% yoy to Rs614.5cr, ~4% lower than estimate. EBITDA margin contracted by 598bps yoy to 25.8% (estimate 25.8%). Income from JV declined by 67.6% yoy to Rs20.9cr. Other income for the quarter doubled on yoy basis to Rs120.4cr. Owing to pressure on the operating performance, company's PAT declined by 21.6% yoy to Rs451.8cr. 
  • Motorcycle sales for Royal Enfield registered a decline of 19.4% yoy to 1,81,673 units on account of weak consumer demand. Company’s preparedness for the BS-VI transition continues to be on track and on course to meet regulatory timelines.
  • Royal Enfield reported revenue decline of 7.5% yoy to Rs2,353cr with EBITDA of Rs609cr (down 25.9% yoy) and PAT of Rs498cr (down 15.7% yoy). Dealers’ network has increased to 928 in Q1FY20 against 915 at the end of FY19.
  • During the first quarter, Royal Enfield continued to strengthen its presence in international markets and entered South Korea and also added two new stores in Brazil, and one each in Argentina, Indonesia and Vietnam.
  • Also, the Interceptor and the Continental GT 650 were launched in Indonesia, Vietnam and Malaysia.
  • In the Commercial Vehicles segment, VE Commercial Vehicles (VECV) - Eicher’s joint-venture with AB Volvo - was affected by the weak demand on account of economic slowdown, liquidity crunch and heavy discounting. For the quarter, VECV’s revenue declined by 13.6% yoy to Rs2,255cr with EBITDA of Rs125cr (down 48% yoy) and PAT of Rs38cr (decline of 68% yoy).
  • Volume sales of VECV declined by 18% yoy to 13,331 trucks and buses. Given poor demand environment, liquidity crunch and heavy discounting, VECV’s reported sales volume declined 9.9% yoy in Light & Medium Duty (LMD) segment, 19.6% yoy in the Heavy Duty (HD) segment, 16.3% yoy in buses and 55% yoy in exports; revenue from Volvo trucks was flat during the quarter.
  • Company lost market share in LMD and buses which stood at 25.9% (29.3% in Q1FY19) and 15.4% (17.4% in Q1FY19), respectively.
  • During the quarter, VECV unveiled the Eicher Pro 2000 series, India’s first BS VI compliant range of CV’s.
Management commentary: The auto industry is currently going through a very challenging phase and both domestic as well as export markets have been severely impacted with a drop of more than 20% in Q1FY20.
  • Two wheeler industry - The demand in two-wheeler industry remains weak due to slowing economic growth, tightening liquidity and regulation driven price increases, that have led to poor consumer sentiment. Company plans to introduce new motorcycle variants in the coming months to widen offering and provide greater accessibility to our discerning customers.
  • CV industry - Overall industry’s sentiments are impacted due to increase in fuel prices, lower availability of loads due to slowdown in economy and consequently low replacement demand. Company expects some pick up from September (onset of the festive season) and also anticipate some positive impact of pre-buying with BS VI norms becoming applicable from April 01, 2020.

Technical View:

Eicher Motors Ltd ended at Rs. 16,148, down by 202.15 points or 1.24% from its previous closing of Rs. 16,350.15 on the BSE.
The scrip opened at Rs. 16,148 and touched a high and low of Rs. 16,148 and Rs. 16,148 respectively. A total of 937 (NSE+BSE) shares were traded on the counter. The stock traded above its 200 DMA.

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