Eicher Motors- Q2 profits beats the estimates| 9% increase in PAT

Founded in 1948,Eicher motors is a company that manufactures motorcycles and commercial vehicles worldwide.

The company reported a 9% YoY increase in profit, currently standing at Rs.373.2 crore for Q2 FY22. This increase can be attributed to the fact that the commercial vehicle sales have increased substantially whereas the Royal Enfield sales have dipped due to the ongoing semi conductor shortage. Revenue from operations increased from Rs.2,134 crore in Q2 FY21 to Rs.2,250 crore in Q2 FY22.

During Q2, Royal Enfield sold around 1,23,515 motorcycles. This is 17.2% less than the amount sold in the same quarter last year. The exports for motorcycles grew by 130% YoY this quarter. Exports are expected to be higher next quarter as shipping to cold countries starts next quarter. The company also launched a new range of motorcycles called Classic 350, which has received a positive response from the customers. There has been a minimal level of cannibalization between Meteor and Classic 350.

In contrast, the commercial vehicle segment’s joint venture with Volvo reaped a sales volume growth of a whopping 85%, from 8167 units in Q2 FY21 to 15,134 units in Q2 FY22. The company was able to grasp 34% of the market share in the LMD segment in Q2 FY22. The VECV’s revenue was up by 80% YoY, from Rs.1,753 crore in Q2 FY21 to Rs.3,153 crore in Q2 FY22. Last year a loss of Rs.7.2 crore was realized but this year it turned into a profit of Rs.18 crore.

According to the management, the current demand is much more than the available supply but price hikes are not expected as of yet. There were two price hikes in July and September 2021. The accessory sales of bikes have gone up 2 times due to high sales on the MIY app.

The EBITDA predicted for FY22 remains at 23.9%. Analysts increased the target price from Rs.2,374 to Rs.2,526 with a Neutral call.