Eicher Motors trades lower for seventh straight day on weak December sales

Eicher Motors shares were trading lower for the seventh straight day, down 3.5 per cent to Rs 20,087 on the BSE on Wednesday on weak December sales. The stock was trading at its lowest level since October 24, 2019.

The company that manufactures the iconic Royal Enfield brand of motorcycles, reported 13 per cent year-on-year (YoY) decline in December 2019 at 50,416 units. It had sold 58,278 motorcycles in the same month last year.

Thus far in January, the stock has slipped 11 per cent, as compared to 1 per cent decline in the S&P BSE Sensex.

For the October-December quarter (Q3FY20), Royal Enfield sold 175,284 motorcycles in the quarter, a decline of 21.5 per cent from 198,106 motorcycles sold over the same period in the last financial year.

Brokerage firm Emkay Global Financial Service expects Eicher Motor’s revenues to increase YoY due to 7 per cent higher realizations, despite a 6 per cent fall in volumes.

“Realizations are expected to increase due to benign mix (the higher share of 650cc twins) and safety norms-related price increases. EBITDA (earnings before interest, tax, depreciation and amortisation) margins should contract due to adverse mix (the higher share of 650cc twins and competitively-priced products) and a lower scale. The share of profit from associates should reduce by 44 per cent YoY to Rs 23 crore,” the brokerage firm said in sector update.

“On VE Commercial Vehicles (VECV) side, the volumes are expected to decline by 25 per cent YoY due to weak demand sentiments. However, the management expects more positive steps in 2-3 months from the government like infrastructure development, incentives based scrappage policy etc,” Narnolia Financial Advisors said in results review. The brokerage firm has ‘neutral’ rating on the stock.

While announcing Q2 results on November 8, the management had said it was optimistic that the industry is likely to perform better in the balance part of the year due to thrust on infrastructure investments and pre-buying of BS-IV vehicles as well due to the likely pick-up in business activity with improved sentiments.

At 01:22 pm, Eicher Motors was trading 3 per cent lower at Rs 20,130, against 0.41 per cent fall in the S&P BSE Sensex. A combined 137,540 equity shares have changed hands on the counter on the NSE and BSE so far.