Eicher Motors: Royal Enfield’s volumes are expected to improve 55% y-o-y in Q2FY16 (Motilal Oswal via IndiaNotes.com)
Highlights:
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With continued higher demand momentum, Royal Enfield’s volumes are expected to improve 55% YoY (19.6% QoQ) and margins are expected to remain strong at 27% (+200bp YoY).
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We expect VECV’s volumes to grow ~19% YoY (decline 3% QoQ) on economic revival and higher fleet operator utilization, leading to replacement demand. VECV margins are expected to improve by 110bp QoQ to 8% on account of operating leverage benefits.
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We anticipate ~36% YoY (6% QoQ) growth in consolidated revenue. Consolidated margins are expected to be 16.2%, up 280bp YoY (240bp QoQ). Consolidated PAT (after minority) would increase 61% YoY (~20% QoQ) to INR2.6b.
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The stock trades at 52.7x CY15E and 29.9x CY16E EPS. Maintain Buy.
Key issues to watch for
- Update on demand and waiting period for Royal Enfield.
- New launches and timelines under Royal Enfield business.
- Update on current CV demand trends, discount levels and channel inventory.
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