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Eicher Motors: Prioritising growth over margin, net positive impact

ICICIdirect Research 14 Feb 2025 DISCLAIMER

On the consolidated basis, total operating income came in at ₹4,973 crore (up 19% YoY) amid healthy Royal Enfield sales volume at 2.7 lakh units (up 19% YoY).

Margin performance on the standalone basis (Royal Enfield franchise) came in below our expectations at 24.9% (down 140 bps QoQ) amidst pressure on gross margins (adverse product mix) and high other expenses (increased marketing spend; ~₹70 crore were incurred due to multiple product launches and the EV brand debut).

We believe market reaction to EML’s focus on growth over margins is overdone as it will in sum lead to overall healthy growth in PAT. With tailwind expected from recent relaxation of personal income tax regime, we continue to assign BUY rating on the stock. EML has capital efficient business model & cash positive b/s. We value EML at ₹ 6,000 (SOTP basis)

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