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ASPs beat estimates, healthy volume growth lies ahead - Eicher Motors Q3 Review

ICICIdirect Research 15 Feb 2023 DISCLAIMER

What's Buzzing 

Eicher Motors (EML) reported a mixed performance in Q3FY23 with ASPs at Royal Enfield (RE) as well as profitability at VECV arm surprising positively while a margin improvement did not materialise on expected lines. EBITDA margins for the quarter came in at 23%, down 30 bps QoQ. The company reported ~64 bps gross margin decline and limited operating leverage gains (other expense as a percentage of sales, down just ~40 bps). 


In Q3FY23, for EML, total operating income was at Rs 3,721 crore, up 5.7% QoQ with average selling price (ASP) coming in at Rs 1.6 lakh/unit, flat QoQ. Sales volumes in Q3FY23 was at ~2.21 lakh units, up 6.6% QoQ. EBITDA in Q3FY23 was at Rs 857 crore with consequent PAT at Rs 741 crore, up 12.8% QoQ. 

Our Perspective 

Eicher Motors (EML) is the market leader in the >250 cc premium motorcycle segment (market share ~85%+) through its aspirational models under the Royal Enfield (RE) brand, such as Classic, Bullet, Hunter, etc. It also has a presence in the 650 cc segment with 650 cc twins wherein its market share in international markets is pegged at ~8-10% in mid-weight segment with new Super Meteor 650 expected to further strengthen its game. With the launch of Hunter 350, the company is well placed for a magnified opportunity size and is best placed to play upon the premiumisation theme in the 2-W space domestically and has sold ~80,000+ units till date with ~24% penetration in Q3FY23. Further, the company recently made a strategic investment in the EV domain for development of premium EV motorcycles and has also showcased its capabilities in alternate fuel technologies like BEV, CNG, fuel cells, hybrid, etc, in the commercial vehicle segment. Going forward, the management commentary was upbeat on demand prospects both domestically as well as globally, normalised supply chain scenario and strong new product launch pipeline. This makes us positive on the stock.

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