Eicher Motors surges 6% post December quarter results

The company's management is optimistic that supply chain constraints will gradually ease out over the next two quarters and production to stabilise over time.

Shares of Eicher Motors moved higher by 6 per cent to Rs 2,717.35 on the BSE in Tuesday’s intra-day trade as the company's management is optimistic that supply chain constraints will gradually ease out over the next two quarters and production will stabilise over time.

In October-December quarter (Q3FY22), the company’s earnings before interest tax and depreciation and amortization (ebitda) declined by 13 per cent year-on-year (YoY) to Rs 580 crore, owing to delays in the pass-through of commodity inflation and product launch spends of Rs 60 crore relating to new generation Classic.

Revenue grew by 2 per cent YoY to Rs 2,900 crore. Profit after tax (PAT) declined 14 per cent YoY at Rs 456 crore as against a profit of Rs 533 crore during the same period last year.

The ongoing global shortage of semiconductor chips and the onset of the third wave of Covid with Omicron impacted the third quarter results. However, Eicher Motors recorded considerable sequential improvement as compared to Q2FY 2022 with a 28.0 per cent growth of revenues and a 35.3 per cent sequential growth of Ebitda.

The growth momentum at Royal Enfield (RE) continues to remain stable, highlighted by persistent good performance in the international markets. Performance across Europe and Americas has consistently registered growing trends.

The management expects a gradual volume recovery ahead, led by improving chip supplies and a healthy order book. "The commercial vehicle industry has continued to improve quarter on quarter and is expected to continue the growth path with a lot of pent up replacement demand and strong focus continuing on infrastructure investments," it said.

Analysts at Edelweiss Securities believe the success of new products remains critical for revival of demand for RE’s products. Besides, launches should enable RE to exploit international markets.

"On the electric vehicle (EV) front, while RE is building capabilities, creating a product road map and pro-typing, and a launch thereof looks distant. EIM has tailwinds of a volume ramp-up as well as launches. However, the current valuation leaves little room for disappointment," the brokerage said and retained ‘hold’ rating on the stock.

The performance miss in EIM was led by lower realization and launch/event related marketing spends. With supply chain issues showing some signs of improvement, the management expects volume performance to be better in FY23.

A focus on exports and revenue from accessories is helping RE improve its realization, Motilal Oswal Financial Services said in result update. "Near term uncertainties due to supply chain issues notwithstanding, the recently launched Classic 350 and upcoming products will help expand its addressable markets and drive the next phase of growth for RE," the brokerage said.