Eicher Motors (Q4 CY13)

Eicher Motors standalone performance was better than estimates with net sales at Rs5.3bn. Volumes were higher by 72.4% while realizations rose 3.2% yoy.

Feb 15, 2014 06:02 IST India Infoline News Service

CMP Rs4,721, Target Rs5,729, Upside 21.4%

Standalone performance: Cruising at high speeds

Eicher Motors standalone performance was better than estimates with net sales at Rs5.3bn. Volumes were higher by 72.4% while realizations rose 3.2% yoy. OPM at 20% was higher than our and street estimates with savings across all heads. Raw material costs as a percentage of net sales was lower by 488bps yoy primarily on account of a favorable product mix and benign raw material prices. With volumes surging benefits of operating leverage was seen with staff costs and overheads declining by 188bps and 168bps yoy respectively. Consequently, net profit more than doubled to Rs744mn.

The company has upped its production guidance for CY14 from 250,000 units to 280,000 units as it continues to raise capacity. For CY15 and CY16 the company has plans to further enhance capacities. Over the next 24 months the company envisages capital expenditure of Rs6bn towards enhancing capacities and R&D investments. Eicher expects its exports from Royal Enfield platform to see strong traction post two or three years.


Results table
(Rs m) Q4 CY13 Q4 CY12 % yoy Q3 CY13 % qoq
RE Volumes 55,103 31,968 72.4 48,242 14.2
Realizations 95,799 92,812 3.2 95,139 0.7
Net sales 5,279 2,967 77.9 4,590 15.0
Material costs (3,145) (1,912) 64.4 (2,818) 11.6
Personnel costs (322) (237) 36.0 (281) 14.7
Other overheads (758) (476) 59.2 (606) 25.0
Operating profit 1,055 342 208.1 885 19.2
OPM (%) 20.0 11.5 844 bps 19.3 70 bps
Depreciation (89) (48) 85.0 (80) 11.3
Interest (1) (1) 40.0 (1) 180.0
Other income 21 106 (80.3) 21 (1.9)
PBT 985 399 147.1 826 19.3
Tax (241) (57) 321.3 (208) 16.0
Effective tax rate (%) 24.5 14.3 25.2
Adjusted PAT 744 342 117.9 618 20.5
Adj. PAT margin (%) 14.1 11.5 259 bps 13.5 64 bps
Ann. EPS (Rs) 110.2 50.6 117.8 91.5 20.5
Source: Company, India Infoline Research

Cost analysis
As a % of net sales Q4 CY13 Q4 CY12 bps yoy Q3 CY13 bps qoq
Raw material 59.6 64.5 (488) 61.4 (183)
Personnel Costs 6.1 8.0 (188) 6.1 (2)
Other overheads 14.3 16.0 (168) 13.2 115
Total costs 80.0 88.5 (844) 80.7 (70)
Source: Company, India Infoline Research

VECV performance - still outperforming larger peers

In line with the CV industry performance VECV saw sharp decline in its volumes in Q4 CY13. While it has gained market share across most categories for CY13, in Q4 CY13 it lost market share as the market leaders resorted to higher discounts. During the quarter the company sold 8,267 vehicles including Volvo Trucks, registering a total decline of 29.6% yoy. Fall was seen across all segments in the domestic market. Exports, however, showed a remarkable increase of 60.2% yoy. During the quarter, the company also sold more than 2,500 long block engines from its recently commenced powertrain plant. OPM at 5.3% was lower by 87bps yoy and 31bps qoq. This was much better than the industry leaders who reported huge losses at operating levels. High discount levels and operating deleverage were the key reasons for the decline in margins.


Results table*
(Rs m) Q4 CY13 Q4 CY12 % yoy Q3 CY13 % qoq
Volumes 8,267 11,735 (29.6) 9,428 (12.3)
Net sales 11,516 13,569 (15.1) 12,244 (5.9)
Operating profit 611 837 (27.0) 687 (11.2)
OPM 5.3 6.2 -87 bps 5.6 -31 bps
PAT 468 710 (34.1) 838 (44.2)
Source: Company, India Infoline Research, * Financial numbers calculated as Consolidated - Standalone

Consolidated Results table
(Rs m) Q4 CY13 Q4 CY12 % yoy Q3 CY13 % qoq
Net sales 16,795 16,536 1.6 16,834 (0.2)
Material costs (8,908) (10,027) (11.2) (9,303) (4.3)
Purchases (2,230) (2,007) 11.1 (2,291) (2.7)
Personnel costs (1,418) (1,238) 14.5 (1,340) 5.8
Other overheads (2,574) (2,085) 23.5 (2,328) 10.6
Operating profit 1,666 1,180 41.2 1,572 5.9
OPM (%) 9.9 7.1 278 bps 9.3 58 bps
Depreciation (394) (245) 60.8 (336) 17.3
Interest (38) (10) 283.7 (23) 64.9
Other income 145 271 (46.4) 679 (78.6)
PBT 1,379 1,196 15.3 1,893 (27.1)
Tax (167) (145) 15.8 (437) (61.7)
Effective tax rate (%) 12.1 12.1 23.1
Other provisions / minority etc (250) (324) (23) (382) (34.7)
Adjusted PAT 962 727 32.4 1,074 (10.4)
Adj. PAT margin (%) 5.7 4.4 133 bps 6.4 (65) bps
Ann. EPS (Rs) 142.5 107.7 32.3 159.1 (10.4)
Source: Company, India Infoline Research

Consolidated Cost analysis
As a % of net sales Q4 CY13 Q4 CY12 bps yoy Q3 CY13 bps qoq
Raw material 53.0 60.6 (760) 55.3 (223)
Purchases 13.3 12.1 114 13.6 (33)
Personnel Costs 8.4 7.5 96 8.0 48
Other overheads 15.3 12.6 272 13.8 150
Total costs 90.1 92.9 (278) 90.7 (58)
Source: Company, India Infoline Research

Maintain BUY rating and target price

Eicher is currently trading at premium valuations of 20.8x CY14E earnings. We believe, the stock deserves the premium given the robust earnings growth prospects. During CY13E-15E, we expect revenue CAGR of 27%, OPM expansion of 350bps and PAT CAGR of 49.6%. RoE and RoCE, during the same period are expected to see a jump of 9.2ppts and 12.1ppts respectively. We value the stock on SOTP basis whereby we arrive at a target price of Rs5,729. We maintain our BUY rating.


Financial Summary
Y/e 31 Mar (Rs m) CY12 CY13E CY14E CY15E
Revenues 63,899 68,098 85,620 109,252
yoy growth (%) 12.4 6.6 25.7 27.6
Operating profit 5,490 7,132 10,177 15,236
OPM (%) 8.6 10.5 11.9 13.9
Pre-exceptional PAT 3,243 3,939 6,118 8,816
Reported PAT 3,243 3,939 6,118 8,816
yoy growth (%) 5.0 21.5 55.3 44.1
         
EPS (Rs) 120.1 145.9 226.6 326.5
P/E (x) 39.3 32.4 20.8 14.5
Price/Book (x) 7.3 6.2 5.0 3.8
EV/EBITDA (x) 21.2 16.6 11.5 7.3
Debt/Equity (x) 0.0 0.0 0.0 0.0
RoE (%) 20.0 20.7 26.5 29.9
RoCE (%) 22.6 21.7 28.5 33.8
Source: Company, India Infoline Research

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