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
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 |
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) |
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) |
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) |
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) |
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 |
