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Stock Data
Sector Automobile
Face Value (Rs.) 10.00
52 wk. High/Low (Rs.) 976.30/285.10
Volume (2 wk. Avg.) 143000
BSE Code 505200
Market Cap (Rs.mn.) 25076.64
Financials (Rs. in mn.) CY08(9M) CY09 CY10E CY11E
Net Sales 19282 29549 39891 47869
EBIDTA 662.3 2498.6 3728.6 4333.9
PAT 672.9 1294.9 2094.2 2480.9
EPS 22.29 31.24 55.99 68.23
P/E 42.14 30.06 16.77 13.77
Eicher Motors Ltd
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SYNOPSIS We initiated the coverage of Eicher Motors Ltd and set a target price of Rs.1080.00
Eicher Motors Limited is the flagship company of the Eicher Group in India and a significant player in the Indian automobile industry. Its 50-50 joint venture with the Volvo group, namely, VE Commercial Vehicles, is involved in business activities ranging from design, manufacturing and marketing of reliable, fuel-efficient commercial vehicles of high quality and modern technology to manufacturing engineering components and providing engineering design solutions.
Eicher Motors and Volvo Group's 50:50 joint venture (JV) VE Commercial Vehicles (VECV) will be investing Rs 2880.00mn in its Pithampur plant for the production and final assembly of the Volvo Group's new global medium-duty engine platform.
VE Commercial Vehicles -- has clocked 44% growth in May sales. It sold a total of 2,801 vehicles in May 2010 against 1,939 vehicles in May 2009.
The Net sales & Net Profit of the company are expected to grow at a CAGR of 40% and 54% over CY08 to CY11E.
1 Year Comparative Graph
Eicher Motors Ltd BSE SENSEX
V.S.R. Sastry
Equity Research Desk
Dr. V.V.L.N. Sastry Ph.D.
Chief Research Officer
C.M.P: Target Price: Rs.939.20 Rs.1080.00
Share Holding Pattern
June 17, 2010
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Table of Content
Content Page No.
1. Peer Group Comparison 03
2. Investment Highlights 03
3. Company profile 06
4. Financials 07
5. Charts & Graph 09
6. Outlook and Conclusion 11
7. Industry Overview 12
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Peer Group Comparison
Name of the company CMP(Rs.) Market
Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)
Eicher Motors Ltd 939.20 25076.64 31.24 30.06 2.34 70.00
Tata Motors Ltd 800.00 456480.00 39.26 20.38 3.67 60.00
Ashok Leyland Ltd 61.95 82414.50 3.18 19.48 3.25 100.00
VST Tillers 400.25 3458.00 49.00 8.17 - 75.00 *As on 17/06/2010
Investment Highlights
Results Updates (Q1 CY10)
For the first quarter, the top line of the company increased 75%YoY and stood at Rs.10409.10mn against Rs.5957.90mn of the same period of the last year. The bottom line of the company for the quarter stood at Rs.402.10mn from Rs.158.30mn of the corresponding period of the previous year i.e. an increase of 154%YoY.
EPS of the company for the quarter stood at Rs.15.06 for equity share of Rs.10.00 each.
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Expenditure for the quarter stood at Rs.9497.50mn, which is around 64% higher than the corresponding period of the previous year. . Raw material cost of the company for the quarter accounts for 51% of the sales of the company and stood at Rs.5356.30mn from Rs.2402.50mn of the corresponding period of the previous year i.e., an increase of 123%YoY. Purchase of finished goods for resale cost stood at Rs.2712.20mn from Rs.1158.60mn. and accounts for 26% of the revenue of the company for the quarter i.e., an increase of 134%YoY.
OPM and NPM for the quarter stood at 11% and 4% respectively from 7% and 3% respectively of the same period of the last year. During the current quarter, 2500 equity shares were issued and allotted as fully paid up at an exercise price of Rs 297 (including premium of Rs 287 each) per equity share under Eicher Employee Stock Option Scheme.
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Eicher Motors JV Company to invest Rs 2880.00mn in Pithampur plant Eicher Motors and Volvo Group's 50:50 joint venture (JV) VE Commercial Vehicles (VECV) will be investing Rs 2880.00mn in its Pithampur plant for the production and final assembly of the Volvo Group's new global medium-duty engine platform. Due to this investment, it will be possible for the Volvo Group to locate most of its production of medium-duty engines to VECV's plant in Pithampur. This investment will result in an annual production capacity of an additional 85,000 engines. In addition to production of the base engine itself, the facility in Pithampur will also conduct final assembly of engines for India and all of Volvo Group's global markets with Euro 3 and Euro 4 emission requirements. In addition to VECV'S investment in India, the Volvo group is making an additional investment of Rs 2166.00mn in Volvo Powertrain's (VPT) production plants in Ageo, Japan and Venissleux, France.
May sales Eicher Motors' 50:50 joint venture (JV) with Sweden-based Volvo -- VE Commercial Vehicles -- has clocked 44% growth in May sales. It sold a total of 2,801 vehicles in May 2010 against 1,939 vehicles in May 2009. The company's sales from exports grew by 116% in the last month compared to the year ago level to 313 units. Meanwhile, on month-on-month basis total sales were down by 8%. The company had sold 3,045 trucks and buses in April 2010.
ICRA rating ICRA has assigned A1+ rating to the Rs. 800 million non fund based limits of VE Commercial Vehicles (VECV). ICRA has also assigned A1+ rating to Rs 1200
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million Short Term Debt/Commercial Paper Programme of VECV. A1 is the highest-credit-quality rating assigned by ICRA to short term debt instruments. The rated instrument carries lowest credit risk in the short term. Within this category, certain instruments are assigned the rating of A1+ to reflect their relatively stronger credit quality.
Company Profile Eicher Motors Limited, incorporated in 1982, is the flagship company of the Eicher Group in India and a significant player in the Indian automobile industry. Its 50-50 joint venture with the Volvo group, namely, VE Commercial Vehicles, is involved in business activities ranging from design, manufacturing and marketing of reliable, fuel-efficient commercial vehicles of high quality and modern technology to manufacturing engineering components and providing engineering design solutions. Eicher Motors’ two-wheeler division manufactures and markets Royal Enfield motorcycles. Eicher has around 2500 employees located in 4 manufacturing facilities and 49 marketing & area offices all around India. The Group has around 308 vendors supplying components and sub-assemblies, which testifies to the strength of the vendor base. The Group’s products are brought to the customers through its strong network of around 142 dealers distributed across the length and breadth of the country. Eicher is present in over 40 countries across the world. 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. Subsidiary companies
Eicher Trucks and Buses (ETB) Volvo Trucks India (VTI) Eicher Engineering Components (EEC) Eicher Engineering Solutions (EES)
Company Products Motors-It manufactures several kinds of commercial vehicles with gross vehicle weight ranging between 5 to 11 tons. It has technical and financial collaboration with Mitsubishi Motors Corporation of Japan which led to manufacturing of CANTER range of vehicles. It manufactures around 20000 vehicles per annum. 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.
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Financials Results 12 Months Ended Profit & Loss Account (Consolidated)
Value(Rs.in.mn) CY09 CY10E CY11E
Description 12m 12m 12m
Net Sales 29549.00 39891.15 47869.38
Other Income 891.70 936.29 983.10
Total Income 30440.70 40827.44 48852.48
Expenditure -27942.10 -37098.77 -44518.52
Operating Profit 2498.60 3728.67 4333.96
Interest -86.70 -83.16 -91.48
Gross profit 2411.90 3645.51 4242.48
Depreciation -538.80 -565.74 -594.03
Profit Before Tax 1873.10 3079.77 3648.45
Tax -578.20 -985.52 -1167.50
Profit after Tax 1294.90 2094.24 2480.95
Minority Interest -461.00 -599.30 -659.23
Net Profit 833.90 1494.94 1821.72
Equity capital 266.90 267.00 267.00
Reserves 10423.60 11918.54 13740.26
Face Value 10.00 10.00 10.00
Total No. of Shares 26.69 26.70 26.70
EPS 31.24 55.99 68.23
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Quarterly Ended Profit & Loss Account (Consolidated)
Value(Rs.in.mn) 30-Sep-09 31-Dec-09 31-Mar-10 30-Jun-10E
Description 3m 3m 3m 3m
Net sales 8592.70 8803.50 10409.10 10721.37
Other income 207.90 209.50 218.20 222.56
Total Income 8800.60 9013.00 10627.30 10943.94
Expenditure -8007.60 -8356.50 -9497.50 -9863.66
Operating profit 793.00 656.50 1129.80 1080.27
Interest -21.20 -21.40 -19.20 -19.58
Gross profit 771.80 635.10 1110.60 1060.69
Depreciation -138.30 -149.30 -135.60 -141.02
Profit Before Tax 633.50 485.80 975.00 919.67
Tax -192.90 -184.20 -313.30 -295.52
Profit after Tax 440.60 301.60 661.70 624.15
Minority Interest -166.60 -97.90 -259.60 -233.64
Net Profit 274.00 203.70 402.10 390.51
Equity capital 266.80 266.90 267.00 267.00
Face Value 10.00 10.00 10.00 10.00
Total No. of Shares 26.68 26.69 26.70 26.70
EPS 10.27 7.63 15.06 14.63
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Key Ratio
Particulars CY09 A CY10 E CY11 E
EBIDTA % 8% 9% 9%
PAT % 4% 5% 5%
P/E ratio (x) 30.06 16.77 13.77
ROE - % 8% 12% 13%
ROCE - % 18% 26% 26%
EV/EBIDITA (x) 3.33 7.53 7.23
Price/Book Value 2.34 2.06 1.79
Charts:
• Net sales & PAT
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• P/E Ratio (x)
• P/BV (X)
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• EV/EBITDA(X)
Outlook and Conclusion
At the market price of Rs.939.20, the stock is trading at 16.77 x and 13.77 x for CY10E and CY11E respectively.
On the basis of EV/EBDITA, the stock trades at 7.53 x for CY10E and 7.23 x for CY11E.
Price to book value of the company is expected to be at 2.06 x for CY10E and 1.79 x for CY11E respectively.
EPS of the company is expected to be at Rs.55.99 and Rs.68.23 for the earnings of CY10E and CY11E respectively.
During the current quarter, 2500 equity shares were issued and allotted as fully paid up at an exercise price of Rs 297 (including premium of Rs 287 each) per equity share under Eicher Employee Stock Option Scheme.
Eicher Motors and Volvo Group's 50:50 joint venture (JV) VE Commercial Vehicles (VECV) will be investing Rs 2880.00mn in its Pithampur plant for the production and final assembly of the Volvo Group's new global medium-duty engine platform.
VE Commercial Vehicles -- has clocked 44% growth in May sales. It sold a total of 2,801 vehicles in May 2010 against 1,939 vehicles in May 2009.
ICRA has assigned A1+ rating to the Rs. 800 million non fund based limits of VE Commercial Vehicles (VECV). ICRA has also assigned A1+ rating to Rs 1200 million Short Term Debt/Commercial Paper Programme of VECV.
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We recommend ‘BUY’ this stock with a target price of Rs.1080.00 for medium to long term investment.
Industry Overview The growth of the Indian middle class along with the growth of the economy over the past few years has attracted global auto majors to the Indian market. India provides trained manpower at competitive costs making India a favoured global manufacturing hub. Propped by the increase in its car sales after the launch of General Motors’ (GM) new model Beat, along with the robust growth in the Indian automobile sector, Kevin E Wale, President and Managing Director, General Motors China Group stated that India should be among the top ten markets for the company globally by 2011. Production: In recent times, India has emerged as one of the favourite investment destinations for automotive manufacturers.
• Nissan Motor India has announced its 'Made-in-India' compact car (hatchback) Nissan Micra at its manufacturing plant at Oragadam, near Chennai. Toshiyuki Shiga, Chief Operating Officer, Nissan Motor Company stated that the India-made Micra will supply to strategic markets such as Europe, Middle East and Africa
• The German luxury car major, BMW has launched four new variants of its new-generation 5-Series sedan in India
• In a bid to capture a bigger share of the ever-expanding consumer base of
luxury segment automobiles in India. Volkswagen has launched its luxury sedan model Phaeton, its latest luxury model
• Hyundai plans to bring forth an upgraded version of i30, latest C segment five-
door hatchback which is designed by Hyundai European team in Germany and is based on the Hyundai i-flow HED-7 hybrid concept. As per the manufacturer, i30U has entered mass production in March 2010 after debuting at the Geneva Motor Show
• Y V S Vijay Kumar, Executive-Vice President, Hindustan Motors India stated
that the company’s Thiruvallur plant has a capacity of 12,000 units and in two years, the company plans to double its manufacturing capacity to reach 24,000 units.
• India's second largest heavy commercial vehicle maker Ashok Leyland Ltd and
Japanese car maker Nissan Motor Co. Ltd announced the launch of three light commercial vehicles (LCVs) from 2011 through 2013
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• According to Andrew Palmer, senior vice-president, Nissan, the company will start marketing a light commercial vehicle (LCV) under its brand name, from its Oragadam plant near Chennai, in the second half of 2011
• Honda Motorcycle and Scooters India (HMSI), the Indian subsidiary of Japanese
auto giant Honda Motor Corporation, will launch its superbike 2010 VFR 1200F in India by December 2010, according to a HMSI executive
Domestic Market/ Sales:
• According to the Society of Indian Automobile Manufacturers (SIAM), overall vehicle sales grew 30 per cent in May 2010 to 1,208,851 units, and 8 per cent over the previous month of April 2010. Two wheeler sales rose 29 per cent, with motorcycle sales increasing 26 per cent to 725,311 units, and scooter sales rising 45 per cent to 157,509 units in May 2010. Commercial vehicle sales rose 58 per cent in May 2010.
• According to SIAM, the medium and heavy commercial vehicle (M&HCV) segment registered a growth of 33.5 per cent at 245,058 units and total commercial vehicle (CV) sales went up by 38.3 per cent to 531,395 units in 2009-10. At an estimated 25 per cent growth, while the M&HCV segment would be about 306,000 units, total CV sales would be about 664,000 units in 2010-11.
• Passenger vehicles sales alone grew by 33.93 per cent in the month of April
2010 as per SIAM report. The growth within this segment was largely driven by a 39.48 per cent growth witnessed in passenger car sales whereas exports continue to grow stronger for the industry as overall exports posted a growth of 87.61 per cent as reported by SIAM.
• Furthermore, the three wheelers segment witnessed a sales increase of 20.41
per cent in April 2010 over April 2009. Two wheeler segment also continued the growth trend registering an upswing of 22.07 per cent at 8,55,670 in April 2010 compared with 7,00,987 in the corresponding period of last year.
• Mahindra and Mahindra (M&M) became the world's number one tractor
company by selling a record of 1.59 lakh tractors in 2009 surpassing John Deere of the US.
Road Ahead: R Seshasayee, managing director, Ashok Leyland, stated that the company plans to invest around US$ 436.6 million over the next two years. The commercial vehicle major said it had earmarked US$ 262 million for capex in addition to investments earmarked for the various joint ventures (JVs) to the tune of US$ 174.7 million. The market for electric vehicles, particularly two-wheelers or e-bikes, is expected to grow with the governments at the Centre and states offering fiscal incentives and as awareness about the ecological benefits of using these vehicles spreads, according to Ms Hemalatha Annamalai, Founder and Chief Executive Officer of Ampere Vehicles Pvt Ltd (AMPVL), Coimbatore.
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Furthermore, following the initiative taken by the Society of Manufacturers of Electric Vehicles (SMEV), the government has given duty concession on the import of certain key components needed by the industry. In addition, the Tamil Nadu Government has also reduced Value Added Tax (VAT) from 12.5 per cent to four per cent benefitting the industry. Pune-based Automotive Research Association of India (ARAI) and DSM of the Netherlands have entered into an alliance to develop new lighter materials that could substitute metals in the automotive industry, and help auto components shed weight. According to the Society of Indian Automobile Manufacturers (SIAM), total commercial vehicle (CV) sales is estimated to grow to 664,000 units in 2010-11, while the medium and heavy commercial vehicle (M&HCV) segment would be about 306,000 units. The Indian automotive industry is all geared up for a roller coaster journey of growth and there is every reason to remain positive about the Indian auto sector in the future. ________________ ____ _________________________
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.
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