Eicher Motors – Power surge

Eicher Motors Ltd is the best performer in the Nifty 50 index on Friday, 12th May 2023, as its surged over 6% after posting their glorious earnings in the March quarter (Q4FY23). A mixture of facts aided the success of the company which comprised of the complete advantage of a price raise in November on the Royal Enfield (RE) models along with a rise in the share of exports.

The company’s Q4 earnings on a standalone basis have been supported by an 8% sequential rise in the average selling price which were aided by a favourable product mix. Additionally, a commodity cost advantage of 90 basis points supported the company’s Q4 EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) surged a historical quarter high of ₹945 crore.

During the earnings call, Eicher expressed vigorous demand for RE models in domestic markets, but the entire two-wheeler demand lacks on the pace. RE has registered its highest ever sales volume historically in FY23, with sales of 834,895 units displaying a fantastic 32% Year-on-Year growth. The share of exports was computed at 12% in FY23, and Eicher focusses to augment in this exports that could support margins. The company has hiked prices on some RE models in the current month of May.

Eicher’s performance is promising, however, the company is plagued with rising competition in the domestic market. The consequences of new launches from Bajaj-Triumph and Hero-Harley collaborations on RE’s market share remains debatable.

Eicher Motors’ commercial vehicle segment which is operated through VE Commercial Vehicles Ltd (A joint venture with the Volvo group) has a vibrant base. The company is hoping for a double-digit growth in medium & heavy commercial vehicle industry volume for FY24.

Despite today’s power spike in Eicher Motors’ share price, the stock lies about 5% below its 52-week high of ₹3,889 per share which had been witnessed in November.

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