Prabhudas Lilladher has given Buy recommendation for Eicher Motors with a target price of Rs. 2950 in its research report issued on May 15, 2022

Prabhudas Lilladher’s research report on Eicher Motors

Eicher’s consolidated EBITDA margin at 23.7% (+350bps QoQ, PLe: 23%) surprised positively. Demand scenario for Royal Enfield is healthy besides good traction received for Classic 350, Meteor 350 and newly launched Scram 411. Semiconductor supply is also improving MoM as the company boarded two new vendors over FY22. Further, exports business is witnessing strong growth led by channel expansion and market share gains; exports volumes grew ~110% in FY22. For VECV, demand continues to witness traction led by cyclical recovery. Demand for CNG variants is strong amidst rising fuel cost scenario. We maintain BUY on Eicher Motors as we anticipate (1) volume growth from Classic 350 plus new product launches and (2) rising exports volume from channel expansion and market share gains to further aid profitability.

Outlook

We trim our EBITDA margin estimates by 100bps for FY23/24 factoring in commodity cost pressures and assign a SoTP based TP of Rs 2,950 (at 27x FY24E EPS for standalone business and 17x for VECV).

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