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Eicher Motors (EIM) - Qtr. Update - Dated - February 13, 2013




Axis Capital Limited


13 Feb 2013





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Eicher’s Q4 consolidated EBIDTA at Rs 1.2 bn was 8% below our estimate. This was due to disappointing performance by VECV# (EBIDTA at Rs 837 mn was 17% below our estimate) on lower revenue and higher raw material costs. Two-wheelers continue to surprise positively with EBIDTA beat of 12% to Rs 342 mn. Lower other income also impacted PAT, which was 9% below estimate at Rs 727 mn. Management indicated waiting list for its two-wheelers is ~7-8 months with strong traction from smaller towns. VECV gained market share across operating segments in CY12. It will introduce series of new products in CY13 and CY14. We reduce our CY13 EPS by 6% to Rs 150 to factor in lower other income and margin pressure in VECV business. Maintain our CY14 EPS at Rs 213 and BUY rating with SOTP-based TP of Rs 3,257. Our TP implies an upside potential of 24% from CMP of Rs 2,605. Key highlights:  Royal Enfield demand continues to see strong traction with expansion to smaller towns, subtle rebranding of product for young generation as well, and product quality improvement. Capacity expansion is on schedule and trial production in new plant will start in Q2CY13  Capex in VECV for CY13 and CY14 to be ~ Rs 12bn. key areas of spend are the engine project (balance portion), bus body capacity, new products (tooling and die), and logistic and marketing spend. Management indicated series of new launches in CY13 and CY14. This will further enable the company to gain market share in M&HCVs  Engine project - Engine plant is expected to stabilize in 12 months. Currently, the engines are in advance stage of trail runs # VE Commercial Vehicle (VECV) is subsidiary of Eicher Motors Regards, Chirag Shah (Sr VP – Automobiles) Institutional Equity Research Axis Capital Limited Tel: 9122 4325 1148 Ronak Sarda (AVP – Automobiles) Institutional Equity Research Axis Capital Limited Tel: 9122 4325 1137

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