eicher motors ltd buy - myirisbreport.myiris.com/firstcall/eicmotor_20131127.pdf · 2013-12-02 ·...
TRANSCRIPT
Recommend BUY
CMP 4350.00
Target Price 4700.00
ISIN: INE066A01013 NOVEMBER 27th
, 2013
EICHER MOTORS LTD Result Update: Q3 CY13
STOCK DETAILS
Sector Automobile
BSE Code 505200
Face Value 10.00
52wk. High / Low (Rs.) 4500.00/2512.00
Volume (2wk. Avg ) 1680
Market Cap ( Rs in mn ) 117493.50
Annual Estimated Results (A*: Actual / E*: Estimated)
Years CY12A CY13E CY14E
Net Sales 10492.60 16565.09 19878.10
EBITDA 1912.10 3836.48 4431.10
Net Profit 1447.60 2746.76 3159.74
EPS 53.61 101.69 116.98
P/E 81.13 42.78 37.18
Shareholding Pattern (%)
1 Year Comparative Graph
EICHER MOTORS LTD S&P BSE SENSEX
SYNOPSIS
Eicher Motors Ltd designs, develops, manufactures,
and markets trucks & buses, motorcycles,
automotive gears & components in India and
internationally.
In Q3 2013, Eicher Motors has reported the best
ever standalone quarterly total income from
operations at Rs 4589.70 million, an increase of
66.23%.
The company net profit jumps to Rs.617.90 million
against Rs.329.70 million in Q2 2012, an increase of
87.41%.
The operating profit recorded an increase of 116.9%
at Rs. 805 million in Q3 2013 over Rs. 371 million in
Q3 2012.
Royal Enfield has registered y-o-y unit sales growth
of 60.6% with record sales of 48,242 units as
compared to 30,046 units in Q3 2012.
VECV’s Eicher Trucks and Buses division (ETB) is
preparing to launch its full new range of trucks and
buses across light, medium and heavy duty.
During the quarter, the Company has reported a
consolidated total income from operations at Rs.
17361 million and EBIT increased by 95.8% in Q3
2013.
During Q3 2013, the Company Heavy Duty market
share increased to 4.5% from 3.7% in Q3 2012.
Net Sales and PAT of the company are expected to
grow at a CAGR of 44% and 36% over 2011 to
2014E respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
COMPANY NAME (Rs.) Rs. in Mn. (Rs.) Ratio Ratio (%)
Eicher Motors Ltd 4350.00 117493.50 53.61 81.13 18.67 200.00
Hero MotoCorp Ltd 2047.00 410457.70 104.77 19.62 8.20 3000.00
Tata Motors Ltd 398.95 1283120.90 31.01 12.42 6.70 100.00
Bajaj Auto Ltd 1952.90 564887.80 109.18 17.88 7.15 450.00
Recommendation & Analysis - ‘BUY’
In Q3 2013, Eicher Motors Limited reported its best ever standalone results- relating entirely to Royal Enfield
motorcycle operations, with a quarterly total income from operations at Rs. 4589.70 million, an increase of
66.23% over Rs. 2761.10 million in Q3 2012. The quarterly operating profit (EBIT) recorded an increase of
116.9% at Rs. 805 million in Q3 2013 over Rs. 371 million in Q3, 2012. Royal Enfield has maintained its
phenomenal growth trajectory even in Q3 2013 registering the best ever quarter results. Royal Enfield has
registered year-on-year unit sales growth of 60.6% with record sales of 48,242 units as compared to 30,046 units
in Q3 2012. It is continuing to extract operating leverage from the business, thus improving the EBIT margin to
17.5% in Q3 2013 as compared to 13.4% in Q3 2012.
The Company continued to improve their overall market share in commercial vehicles through 50:50 joint
venture with the Volvo Group – VE Commercial Vehicles (VECV). For the nine month period ending September
30, 2013, the industry declined by 33.6%, but the Company Heavy Duty market share increased to 4.5% from
3.7% in the corresponding period last year. The products in the bus segment continue to do well. For the third
quarter ending September 30, 2013, the Company has reported a consolidated total income from operations at
Rs. 17361 million. Earnings before interest and tax (EBIT) are increased by 95.8% in Q3 2013.
VECV’s Eicher Trucks and Buses division is preparing to launch its full new range of trucks and buses. These are
absolutely world-class products that will completely renew ETB’s product portfolio. Royal Enfield has created
and been leading the premium category of motorcycles in India for all these years with evocative products such
as the Classic and the Thunderbird. In September 2013, Royal Enfield had its first successful global launch with
the all new Continental GT- a motorcycle that perfects the essential elements of the most influential idea in
motorcycling history – café racing.
Over FY2011-14E, we expect the company to post a CAGR of 44% and 36% in its top-line and bottom-line
respectively. Hence, we recommend ‘BUY’ with a target price of Rs. 4700.00 for Medium to Long term
investment.
FINANCIAL HIGHLIGHTS STANDALONE
Results updates- Q3 CY13,
The Eicher Group has diversified business interests
in design & development, manufacturing and local/
international marketing of Trucks & Buses,
Motorcycles, Automotive Gears and components,
reported its financial results for the quarter ended
30th Sep, 2013.
Months Sep-13 Sep-12 % Change
Net Sales 4589.70 2761.10 66.23
PAT 617.90 329.70 87.41
EPS 22.88 12.21 87.34
EBITDA 906.20 454.60 99.34
The company net profit jumps to Rs.617.90 million against Rs.329.70 million in the corresponding quarter
ending of previous year, an increase of 87.41%. Revenue for the quarter rose by 66.23% to Rs.4589.70 million
from Rs.2761.10 million, when compared with the prior year period. Reported earnings per share of the
company stood at Rs.22.88 a share during the quarter, registering 87.34% increase over previous year period.
Profit before interest, depreciation and tax is Rs. 906.20 millions as against Rs.454.60 millions in the
corresponding period of the previous year.
Expenditure:
During the quarter total expenditure raised by 58
per cent mainly an increase in Material Consumed
Cost along with consideration of depreciation in the
rupee impact. Total expenditure in Q3 CY13 was at
Rs. 3784.70 millions as against Rs. 2390.00 millions
in Q3 CY12. Consumption of Raw Materials cost
stood at Rs. 2877.10 millions against Rs. 1800.40
millions in the corresponding period of the previous
year. Employee Benefit Expenses was at Rs. 280.50
millions and other expenditure at Rs. 606.00
millions in Q3 CY13 are the primarily attributable to
growth of expenditure.
Latest Updates
• Royal Enfield has registered year-on-year unit sales growth of 60.6% with record sales of 48,242 units as
compared to 30,046 units in Q3 2012.
• The Company has sold 1858 buses in Q3 2013 compared to 2326 buses over same period last year,
registered a degrew of 20.12%
• Eicher Motors has recently started production at VECV’s Medium Duty Engine Plant at Pithampur, Madhya
Pradesh. The plant has been set up with an initial capacity of 25,000 units per annum in Phase I, at an
investment of Rs 375 crores. The capacity will be increased in a phased manner to 100,000 units per annum
as per the market requirements with an additional investment of around Rs 125 crores.
• Starting end 2013 till 2015, VECV’s Eicher Trucks and Buses division (ETB) will be renewing its entire
product portfolio by launching its new range of trucks and buses across light, medium and heavy duty. The
Company continues to invest in all their strategic projects in VECV. By end of CY 2014, it would have invested
Rs. 2500 crores since the creation of the joint venture in mid 2008.
• During the quarter ended June, 2013, VE Commercial Vehicles has set up a wholly owned subsidiary V E C V
Lanka (Private) Ltd in Sri Lanka for the purpose of expanding its commercial vehicles operations in Sri Lanka
with an investment of Rs. 54.3 million.
Company Profile
Eicher Motors Limited (EML) is the flagship company of the Eicher Group, which was a catalyst in the green
revolution in India with the production of India’s first agricultural tractor in 1959. EML is now a leading player in
the Indian automotive space. Its 50-50 joint venture with the Volvo group, VE Commercial Vehicles Limited,
designs, manufactures and markets reliable, fuel-efficient trucks and buses; and is leading the path in driving
modernization in commercial transportation in India and other developing markets. Eicher Motors also owns the
iconic Royal Enfield motorcycle business, which leads the premium motorcycle segment in India. The oldest
motorcycle company in continuous production world-wide, Royal Enfield has witnessed a huge surge in demand
in the recent past, and is charting its course to be the leading player in the mid-size motorcycle segment globally.
EML’s 50:50 strategic joint venture with US based Polaris Industries Inc., Eicher Polaris Private Ltd. is in start-up
phase, and is currently designing and developing, and will soon manufacture and sell a full new range of personal
vehicles. In 2012, Eicher Motors recorded its highest ever sales of INR 7,000 crores (USD 1.3 billion).
Royal Enfield has also substantially expanded and upgraded its network across the country. In 2012 it added 63
new dealerships taking the total dealership network to 249.
Over 85 executives work exclusively in the area of R&D. Product development and product-engineering facilities
are available at each of Eicher’s major manufacturing locations. Expertise has been developed in the areas of
design and development of Trucks & Buses, Automotive transmission, Electronic instrumentation, Material
science, Metrology as well as prototype manufacturing and testing.
Products:
� Motors
It manufactures several kinds of commercial vehicles with gross vehicle. It has technical and financial
collaboration with Mitsubishi Motors Corporation of Japan which led to manufacturing of CANTER range of
vehicles.
� Motorcycles
It manufactures bullet motorcycles Royal Enfield. It manufactures six different models ranging from 300cc to
600cc. The manufacturing plant has installed capacity of 39,000 motorcycles per annum.
� Engineering Components
The company manufactures complete range of automotive gears. The range of gears includes Spiral bevels
(Crown wheel and pinions), Straight bevels and Transmission gears.
Financial Highlight STANDALONE
Balance sheet as at December 31st, 2011-2014E
(A*- Actual, E* -Estimations & Rs. In Millions)
EICHER MOTORS LTD. CY11A CY12A CY13E CY14E
SOURCES OF FUNDS (Rs.in.mn)
Shareholder's Funds
Share Capital 269.90 270.00 270.10 270.10
Reserves and Surplus 5130.50 6020.50 8767.26 11927.00
1. Sub Total - Net worth 5400.40 6290.50 9037.36 12197.10
Non Current Liabilities
Long Term Borrowing 5.80 0.00 0.00 0.00
Deferred Tax Liability (net) 39.20 62.60 105.20 82.06
Other Long term Liabilities 27.30 32.30 38.11 42.69
Long Term Provisions 80.90 92.60 103.71 112.01
2. Sub Total - Non Current Liabilities 153.20 187.50 247.03 236.75
Current Liabilities
Short term borrowings 136.70 200.10 322.16 373.71
Trade Payables 1058.70 1775.00 2396.25 2731.73
Other Current Liabilities 595.10 1168.10 1366.68 1503.34
Short Term Provisions 479.70 621.20 93.18 102.50
3. Sub Total - Current Liabilities 2270.20 3764.40 4178.27 4711.27
Total Liabilities (1+2+3) 7823.80 10242.40 13462.65 17145.13
APPLICATION OF FUNDS
Non-Current Assets
Fixed Assets
Tangible assets 1097.50 1338.30 1900.39 2394.49
Intangible assets 25.50 38.70 50.31 62.38
Capital Work in Progress 42.10 603.30 868.75 1042.50
a) Sub Total - Fixed Assets 1165.10 1980.30 2819.45 3499.37
b) Non-current investments 54.40 109.40 114.87 119.46
c) Long Term loans and advances 348.10 613.00 472.01 528.65
d) Other non-current assets 57.60 61.80 77.87 89.55
1. Sub Total – Non Current Assets 1625.20 2764.50 3484.20 4237.04
Current Assets
Current Investments 5125.70 6384.50 8133.86 10483.55
Inventories 452.7 754.10 942.63 1150.00
Trade receivables 41.00 62.00 150.50 204.68
Cash and Bank Balances 29.80 35.00 96.00 126.72
Short-terms loans & advances 138.70 239.40 652.40 939.46
Other current assets 410.70 2.90 3.07 3.69
2. Sub Total - Current Assets 6198.60 7477.90 9978.46 12908.09
Total Assets (1+2) 7823.80 10242.40 13462.65 17145.13
Annual Profit & Loss Statement for the period of 2011 to 2014E
Value(Rs.in.mn) CY11A CY12A CY13E CY14E
Description 12m 12m 12m 12m
Net Sales 6709.50 10492.60 16565.09 19878.10
Other Income 758.90 457.80 812.42 853.05
Total Income 7468.40 10950.40 17377.51 20731.15
Expenditure -5899.70 -9038.30 -13541.03 -16300.04
Operating Profit 1568.70 1912.10 3836.48 4431.10
Interest -20.20 -2.60 -1.90 -2.28
Gross profit 1548.50 1909.50 3834.58 4428.82
Depreciation -130.20 -171.50 -299.90 -377.87
Profit Before Tax 1418.30 1738.00 3534.68 4050.95
Tax -172.80 -290.40 -787.92 -891.21
Net Profit 1245.50 1447.60 2746.76 3159.74
Equity capital 269.90 270.00 270.10 270.10
Reserves 5130.50 6020.50 8767.26 11927.00
Face value 10.00 10.00 10.00 10.00
EPS 46.15 53.61 101.69 116.98
Quarterly Profit & Loss Statement for the period of 31st Mar, 2013 to 31st Dec, 2013E
Value(Rs.in.mn) 31-Mar-13 30-Jun-13 30-Sep-13 31-Dec-13E
Description 3m 3m 3m 3m
Net sales 3338.00 3818.20 4589.70 4819.19
Other income 681.90 77.10 21.20 32.22
Total Income 4019.90 3895.30 4610.90 4851.41
Expenditure -2747.20 -3137.40 -3704.70 -3951.73
Operating profit 1272.70 757.90 906.20 899.68
Interest -0.50 -0.30 -0.50 -0.60
Gross profit 1272.20 757.60 905.70 899.08
Depreciation -59.80 -75.30 -80.00 -84.80
Profit Before Tax 1212.40 682.30 825.70 814.28
Tax -240.40 -156.10 -207.80 -183.62
Net Profit 972.00 526.20 617.90 630.66
Equity capital 270.00 270.10 270.10 270.10
Face value 10.00 10.00 10.00 10.00
EPS 36.00 19.48 22.88 23.35
Ratio Analysis
Particulars CY11A CY12A CY13E CY14E
EPS (Rs.) 46.15 53.61 101.69 116.98
EBITDA Margin (%) 23.38% 18.22% 23.16% 22.29%
PBT Margin (%) 21.14% 16.56% 21.34% 20.38%
PAT Margin (%) 18.56% 13.80% 16.58% 15.90%
P/E Ratio (x) 94.26 81.13 42.78 37.18
ROE (%) 23.06% 23.01% 30.39% 25.91%
ROCE (%) 30.65% 32.10% 44.19% 38.26%
Debt Equity Ratio 0.03 0.03 0.04 0.03
EV/EBITDA (x) 74.92 61.51 30.68 26.57
Book Value (Rs.) 200.09 232.98 334.59 451.58
P/BV 21.74 18.67 13.00 9.63
Charts
Outlook and Conclusion
� At the current market price of Rs.4350.00, the stock P/E ratio is at 42.78 x CY13E and 37.18 x CY14E
respectively.
� Earning per share (EPS) of the company for the earnings for CY13E and CY14E is seen at Rs.101.69 and
Rs.116.98 respectively.
� Net Sales and PAT of the company are expected to grow at a CAGR of 44% and 36% over 2011 to 2014E
respectively.
� On the basis of EV/EBITDA, the stock trades at 30.68 x for CY13E and 26.57 x for CY14E.
� Price to Book Value of the stock is expected to be at 13.00 x and 9.63 x respectively for CY13E and CY14E.
� We recommend ‘BUY’ in this particular scrip with a target price of Rs.4700.00 for Medium to Long term
investment.
Industry Overview
With the increasing growth in demand on back of rising income, expanding middle class and young population
base, in addition to a large pool of skilled manpower and growing technology, will propel India to be among the
world's top five auto-producers by 2015. India is also one of the key markets for hybrid and electric medium-
heavy-duty trucks and buses.
Key Statistics
The Indian automobile industry produced a total 1.69 million vehicles including passenger vehicles, commercial
vehicles, three wheelers and two wheelers in August 2013 as against 1.56 million in August 2012, registering a
growth of 8.18 percent over the same month last year.
The cumulative foreign direct investment (FDI) inflow into the Indian automobile industry during April 2000 to
July 2013 was recorded at US$ 8,932 million, amounting to 4.5 per cent of the total FDI inflows (in terms of US$),
according to Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce.
The overall automobile exports grew by 2.03 per cent during April-August 2013. Furthermore, the production of
passenger vehicles in India was recorded at 3.23 million in 2012-13 and is expected to grow at a compound
annual growth rate (CAGR) of 13 per cent during 2012-2021.
Major Developments & Investments
• Hero MotoCorp plans to establish 20 manufacturing and assembly facilities to expand its presence across
50 countries by 2020
• Nissan Motor India has entered into an agreement with Ennore Port Ltd (EPL), to export at least 60,000
cars a year through the port for the next 10 years
• TVS Motor Co plans to launch two new motorcycle models in the Kenyan market. These motorcycles will
be specific to the Kenyan markets in terms of usability, reliability and durability. Moreover, the firm also
plans to set up a two-wheeler assembly line in Uganda and will also launch two motorcycle models in the
African nation
• HMIL has invested US$ 2 billion in two state-of-the-art passenger car manufacturing facilities in India.
Moreso, India contributes 25 per cent of the firm’s global sales
• Mahindra & Mahindra (M&M) plans capital expenditure and investments worth Rs 10,000 crore (US$
1.63 billion) over the next two years
• Maruti Suzuki India is setting up an operational integrated research & development (R&D) centre in
Rohtak, Haryana. The test tracks at the new facility would be longer and considerably enhanced in
technical capabilities than the ones at the Suzuki Motor Corp (SMC) facility in Japan
• Tech Mahindra has signed an agreement with Volvo Car Corporation. The IT company will provide Volvo
with a service to maintain and develop a range of applications that can increase efficiency and reduce
costs
• Isuzu Motors India plans to start contract manufacturing of its sports utility vehicles (SUV) and pick-up
trucks at Hindustan Motors' (HM) Chennai plant from December 2013
• Daimler India Commercial Vehicles (DICV) has expanded its network across the country. The company
plans to establish dealership facilities in over 100 identified locations across India by 2014
Government Initiatives
The Government of India plans to introduce fuel-efficiency ratings for automobiles to encourage sale of cars that
consume less petrol or diesel, as per Mr Veerappa Moily, Union Minister for Petroleum and Natural Gas,
Government of India.
The Union Budget 2013-14 added some incentives to the industry.
• The period of concession available for specified part of electric and hybrid vehicles till April 2013 has
been extended upto March 31, 2015
• The basic customs duty (BCD) on imported luxury goods such as high-end motor vehicles, motor cycles,
yachts and similar vessels was increased. The duty was raised from 75 per cent to 100 per cent on cars/
motor vehicles (irrespective of engine capacity) with CIF value more than US$ 40,000; from 60 per cent
to 75 per cent on motorcycles with engine capacity of 800 cc or more and on yachts and similar vessels
from 10 per cent to 25 per cent
• In addition, an increase in excise duty from 27 to 30 per cent has been allowed for SUVs with engine
capacity exceeding 1,500 cc, while excise duty was decreased from 80 to 72 per cent, in case of SUVs
registered solely to be used for taxi purposes
• An exemption from BCD on lithium ion automotive battery for manufacture of lithium ion battery packs
for supply to manufacturers of hybrid and electric vehicles
• The excise duty on chassis of diesel motor vehicles for transport of goods reduced from 14 per cent to 13
per cent
The Government of India allows 100 per cent FDI in the automotive industry through automatic route. The
Government also plans to accelerate the supply of electric vehicles over the next eight years. It is expected that
there will be a demand for 5-7 million electricity-operated vehicles by 2020.
With special focus on exports of small cars, MUVs, two & three wheelers and auto components; the automotive
sector’s contribution to the gross domestic product (GDP) is expected to double reaching a turnover worth US$
145 billion in 2016, according to the Automotive Mission Plan (AMP) 2006-2016.
Road Ahead
India is probably the most competitive country in the world for the automotive industry. It does not cover 100
per cent of technology or components required to make a car but it is giving a good 97 per cent.
The vision of AMP 2006-2016 sees India, “to emerge as the destination of choice in the world for design and
manufacture of automobiles and auto components with output reaching a level of US$ 145 billion; accounting for
more than 10 per cent of the GDP and providing additional employment to 25 million people by 2016.”
Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale
of any financial instrument or as an official confirmation of any transaction. The information contained herein is
from publicly available data or other sources believed to be reliable but do not represent that it is accurate or
complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall
not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. This document is provide for assistance only and is not intended to be and must
not alone be taken as the basis for an investment decision.
Firstcall India Equity Research: Email – [email protected]
C.V.S.L.Kameswari Pharma
U. Janaki Rao Capital Goods
B. Anil Kumar Diversified
Ashish.Kushwaha IT, Consumer Durable & Banking
Suhani Adilabadkar Diversified
M. Vinayak Rao Diversified
Firstcall India also provides
Firstcall India Equity Advisors Pvt.Ltd focuses on, IPO’s, QIP’s, F.P.O’s,Takeover
Offers, Offer for Sale and Buy Back Offerings.
Corporate Finance Offerings include Foreign Currency Loan Syndications,
Placement of Equity / Debt with multilateral organizations, Short Term Funds
Management Debt & Equity, Working Capital Limits, Equity & Debt
Syndications and Structured Deals.
Corporate Advisory Offerings include Mergers & Acquisitions(domestic and
cross-border), divestitures, spin-offs, valuation of business, corporate
restructuring-Capital and Debt, Turnkey Corporate Revival – Planning &
Execution, Project Financing, Venture capital, Private Equity and Financial
Joint Ventures
Firstcall India also provides Financial Advisory services with respect to raising
of capital through FCCBs, GDRs, ADRs and listing of the same on International
Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and
other international stock exchanges.
For Further Details Contact:
3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai 400 071
Tel. : 022-2527 2510/2527 6077/25276089 Telefax : 022-25276089
E-mail: [email protected]
www.firstcallindiaequity.com