Eicher Motors


(Raj Panda) #1

Here are consolidated figures for Eicher Motors


2009 2010 2011 2012 2013 (9M)
CV Nos. 25164 39275 49042 48831
2W (RE) 51955 52576 74626 113432
2W Capacity 60k 60k 150k ??
Net Income 3044 cr. 4829 5826 6526 5130
PAT (NPM) 129 (4.3%) 306 (6.8%) 497(8.5%) 475 (7.3%) 404
EPS (Basic) 30.78 70.54 114.48 120.11 110
Dividend 5 7 11 16 20
WorkCap 1114 1116 1015 691 --
Net Fixed Asset 375 454 917 1496 --

*Year Ending Dec

CMP:4135

Mcap: 4136 cr.

Debt is negligible.

- As is evident from the numbers, company is getting a phenomenal response to it's 2 wheeler's, the Royal Enfield range. In fact company had a waiting time of 6-8 months till recently which has now reduced to 3-4 months.

- In the 2-wheeler's, the main growth is coming from the premium segment (250cc and above) which grew by 71% in 2012. So practically, company has a monopoly which is seeing demand and very little chance of other existing player catching up soon.

- Company has recently launched a new range of 2W, continental GT with a retro look. International press was present in good numbers at the launch and Eicher think's there is an international market for their 2W products. Total export of 2W so far were very less with 3532(2012) & 3200(2011).

- Company has tie up with Volvo for the commercial vehicles, and recently completed 5 years of operation together. Bus segment is seeing good growth and there are plans to invest 2500 cr. by 2014 for bus body,engine,.. plant. Company has seen it's market share increase from 6-7% to 15-16% in the last 5 years.

- Company has embarked on a joint venture with Polarisin 2012, a renowned name in personal utility(?) vehicle, operations will start in 2015. Overall investment of 250 cr.

- Started manufacturing from Oragadum facility in Chennai in 2013,

-Here is a good interview from MD. Sidharth Lal, on how the Indian market is shaping up.

Key Risks Identified by Company:

1. inability of suppliers and plantâs production capacity tomeet demand

2. loss of customer satisfaction and brand image due toquality issues

3. significant rise in cost of input materials like steeland aluminum

Many ppl on the forum own Eicher Motors, and am sure they have lot to share on this story. This seems like a company that we at vp prefer, sales growing, strong demand, good financial management etc etc...I was quite surprised actually that we don't have thread yet on this company. So, there you go. Please help with your insights.

Linlk to HDFC Sec Report


(Vivek Gautam) #2

The company has been one of the best wealth creator of recent times.

The co has a dynamic CEO Siddarth Lal who is responsible for the turnaround of Royal Bullet .The guy is in his 40s only the best age for a performing CEO & co. AS such the future shud be OK.

I havent studied the co in detail.

Whats the opportunity size for the co as CV seems to be slowing down.


(Raj Panda) #3

The PAT figures mentioned above have to be restated, because the commercial vehicle division is a 54.4% subsidiary of eicher motors. So a minority interest has to be deducted from pat to arrive at correct figure. Will update the table later. Please bear with me.


(Raj Panda) #4

2009
2010
2011 2012 2013 (9M)
PAT 129.4 306.8 497.4 474.8 404
Minority Interest
46.1 117.9 188.6 150.9 106.49
PAT after Minority interest
83.3 188.9 308.7 324.4 297.6

the Mcap mentioned above also is wrong :) , it's : 11146 cr.

At a estimated PAT for CY 13 of 342 (HDFC Sec estimate) , the forward PE is 32.6.


(Raj Panda) #5

Hi Vivek,

About the demand scenario of CV division and how it might impact the overall result consider this:

PAT figures for 2W division for 2012 was 144 crore which was 44% of total profits of 324.4 cr…

In the first 9 month’s of CY13 the PAT figure from 2W division is already at 211 cr. Vs 110 cr. for same 9M period of 2012, a growth of 191%.

Also the 9M PAT figure for 2W div. at 211 cr. is 71% of the total consolidated profit of 297.6.

So the profitability of the 2W div. seems to be galloping at a pace which is making the flat demand scenario in the CV division a less of a concern.

Also, Chennai plant is going to have 2W capacity of 175k by CY2013 and 250k units by CY2014 and they seem to have the demand pipeline to utilize this kind of capacity.

The story seems good to dig more.


(Ankit Gupta) #6

Hi Raj,

Just a correction. The market cap of the company is around 11000 crore as per screener and moneycontrol.


(Raj Panda) #7

hi Ankit,

Yes, i realized that and made the correction above in another post.

“the Mcap mentioned above also is wrong :)) , it’s : 11146 cr.”


(Ankit Gupta) #8

Hi Raj,

Sorry. Just missed that post.

:))


(anand mashalkar) #9

Dear raj sir

I have purchased royale enfield arround 1 year back.No maintenance bike. quality wise a1(They are very particular in this respect , right from single screw to there engine)and i have paid a premium price for it.(165000) There was 15 months waiting period for it now it reduced to 4 to 5 months.( may be they have started there south plant)some buyes treat RE as assets than liability as even old bullets are very expensive compare to other bikes. Now its wait is reduced dramatically so any one can drive it comfortably. They have launched thunderbird 500 this year and they are planning to launch new cafe bike which has got very good response out of india. lot of my friends are having two to three RE bikes and who are ready to pay even 30 to 50 % more prise to own these indian harlies.so lot of potential in urban area and rural area and they are having pricing power and they are having monopoly as harlies bikes are costly in india.

There classic500 and classic350 is well established brands in rural as well as urban areas.

I have taken position in eicher motors (at 3050)when i had a chat with two drivers.Theythem selfrecommended their owners buying eichers trucks as according to themquality wisetrucks are better than tatas and in hillly areas they easilyclimbhills. earlier his owner was having 60trucksof tata now they have added 20 new trucks of eichers and will add more eichers.

Dont know how the volvo is doing.

But donald sir, hitesh sir, hemant sir and other senior members please throw some light on the fundamentals of this company as your comments are very valuable for us.

disc- I have a position in it and i own its product so my view may be biased.


(Raj Panda) #10

Hi Anand,

Thanks for your feedback. That’s the beauty of this brand, almost everyone who owns a RE is very passionate about it and is a willing brand ambassador.

On the price, i think like Page, this product also falls in the “affordable premium” category. Compare the prices to other bikes in 150 & 200 cc category like Pulsar which are costing in range of 75-85k and i get a feel that for a RE 350 cc bike is really in affordable range.

Also, i think we have genuine reason to be excited about the export avenues, if the company targets them in manner like Bajaj has done for it’s bikes. Am sure in many markets there is a latent demand for this kind of affordable luxury bikes.

The CV business is more prone to vagaries of economic cycle. They have been impacted by the ban on mining too. Will post a more detailed note on the constituents of CV division, but it’s nothing exciting really. If it does well, then just a added bonus.

Disc: I have a starter position, and looking for an opportunity to increase position.

IMP: No sir please!! There is a guideline issued from forum Admin for this. We are all on first name basis here and trying to learn from each other.


(Raj Panda) #11

Meanwhile there is new competition emerging from Haley Davidson, they are launching bikes in India for below 5 lakh.

It’s a different segment though (owing to it’s price tag) and not to forget, competition often helps to expand the category and making the pie bigger.


(dr mehul shah) #12

launching of new series PRO.

“The combination of the Volvo Group’s leading technology with Eicher Motor’s Indian heritage and frugal cost expertise has created a new range that will support customers in achieving even greater productivity, profitability and prosperity. India is aggressively investing in infrastructure. Improved roads and more effective logistics chains put new and higher demands on vehicles and that leads to new opportunities for Eicher”, says Joachim Rosenberg, Executive Vice President, Group Trucks Sales & Marketing and JVs APAC.

The Pro Series is in a prime position to meet these requirements and will support and drive Indian modernisation. In addition, and for the first time, Eicher will have dedicated export variants for e.g. South East Asia and Africa that will generate further growth for VECV.

The Pro Series includes 11 new models of trucks and buses, covering the entire 5 to 49 ton gross vehicle weight range. While continuing to address the Indian mainstream market, the new Eicher range also contains models that enable entry into the evolving customer segments in India that require higher power and/or torque offerings. As such, the new vehicle range contains models that will be powered by engines adapted from Volvo Group technology with output up to 280 hp, offering high fuel efficiency, reliability and durability.

The VECV industrial facilities have been upgraded and modernised to produce this new range. The investments include; new assembly lines, a cab factory and cab painting workshop as well as a world-class engine factory. VECV will start production of the Eicher Pro Series in February 2014


(dr mehul shah) #13

Swedish investment company Cevian Capital said Monday it has acquired 25 million A-shares in AB Volvo (VOLV-B.SK), increasing its ownership to 68,727,400 A-shares and 29,776,795 B-shares, corresponding to 10.51% of the voting rights and 4.63% of the share capital.


(dr mehul shah) #14

Britain’s Triumph Motorcycles will start selling its iconic bikes in India on Thursday as it seeks to capture the hearts of wealthy motor heads who ride for passion not function.

Privately held Triumph is following high-end motorcycle makers such as Harley-Davidson Inc(>>Harley-Davidson, Inc.) and Volkswagen AG’s(>>Volkswagen AG) Ducati in entering a market where quick-rising wealth is leading to greater demand for expensive toys.

“The best combination on the road is the bike and the road - they are the only two people who can talk to each other. I think that culture is coming up in India,” Triumph India Managing Director Vimal Sumbly told Reuters in an interview on Friday.

Triumph not only has to win over customers, but also has to persuade people to buy touring bikes in a country notorious for poor roads. Its track record for infrastructure development is miserable compared with China and most other emerging economies, and its failure on this score has sapped growth.

Most Indians commute using motorcycles or scooters and it is common to see families of four or five on a single vehicle snaking through heavy traffic or even over pavements escaping jams. As the economy slows, two-wheelers comprise the only category of the auto industry to register growth this year.

Sales of motorcycles with an engine displacement of 350 cubic centimetres or less, which make up the bulk of the market, have risen about 3.5 percent so far this fiscal year, show data from the Society of Indian Automobile Manufacturers (SIAM).

Sales of more powerful bikes, including those from Harley and Eicher Motors Ltd’s(>>Eicher Motors Ltd) Royal Enfield, have doubled over the same period. Industry watchers say strong growth is likely to continue in the medium term, as consumers in the luxury segment are not as vulnerable to the impact of a slowing economy.

Still, high-end motorcycles form a miniscule portion of the Indian two-wheeler market, the world’s largest by some estimates with sales of nearly 14 million bikes in the last fiscal year.

Harley, which shipped nearly 250,000 motorcycles globally in 2012, sells about 150 bikes a month through its 10 Indian dealers, according to SIAM.

Triumph, which sold more than 50,000 bikes last year, plans to open at least three showrooms by the end of 2013, in New Delhi, Mumbai and Bangalore.

The company, which began life as a bicycle manufacturer in 1887, will assemble some models at its new plant in Manesar, northern India, to save on high import taxes and so keep prices down. It also plans to build a factory in the southern state of Karnataka.

As well as Harleys, Triumph’s classic cruisers and sports bikes will also compete with offerings from Honda Motor Co Ltd(>>Honda Motor Co Ltd), Yamaha Motor Co Ltd(>>Yamaha Motor Co., Ltd.) and Bayerische Motoren Werke AG’s(>>Bayerische Motoren Werke AG) BMW Motorrad - plus the lower priced bikes of Royal Enfield.

“We will be an aspirational brand for guys who use (Royal Enfield) bikes,” said Sumbly, who was previously with Bajaj Auto Ltd(>>Bajaj Auto Ltd), India’s second-largest motorcycle maker.

Asked whether Triumph would design an India-specific bike, Sumbly said, “As the market develops and we see the growth, the company will surely invest more and more in India.”

(Editing by Christopher Cushing)


(dr mehul shah) #15

eicher motors has today closed above its short term target of rs. 5095.60/----

till it closes below.,its medium term target of rs.5315/====is intact.


(Raj Panda) #16

Thanks for the updates Dr. Mehul. Triumph is the new entry and will surely make this category more exciting.

Some historical data on the commercial vehicle segment for Eicher Motors.

Comm Vehicle
2007
2008 (Growth%)
2009 2010 2011 2012
Eicher 5-14 Ton Cargo
19556 15804(-19%) 16893(7%) 26426(56%)
31381(19%) 29541(-6%)
E16 Ton Cargo
4393 2496 (-43%)
1424(-43%) 4219(196%) 7352(74%) 7699(5%)
Eicher Bus
3664 2942(-20%) 3282(12%) 4819(47%) 6496(35%) 8521(31%)
EB/Cargo Export
2216 2533(14) 2665(5) 2717(2) 3108(14) 2501(-20%)
EVolvo Trucks
823 948(15) 900(-5%) 1094(22%) 705(-36%) 569(-19%)
Total 30652 24723 (-19%)
25164(2%) 39275(56%) 49042(24%) 48831(0%)


(Raj Panda) #17

The above data on commercial vehicle would be more informative if I could include the industry growth figures. That would help to get idea about market share change for Eicher. If any one has data or info on how to go about finding it, please help.

**Here is a recent interview of Mr. Lal:
**

You launched the Continental GT for the international market in September. How has the response been?

We have started customer delivery in a few of the larger markets in Europe and the US. Australia and Japan are next. We have got a very good response. The orders we have received are much more than we had anticipated.

The launch of Continental GT based on the Cafe Racer concept in the UK seems to be a different approach to woo the international markets. Is this a new strategy of the company?

September was the point when we shifted our entire approach to global motorcycling. Until now we were more opportunistic though we weren’t embedded in many countries. Our approach is changing. When I say strategic, I mean our pricing, our distribution, our promotion are more carefully planned. And, we’ll be represented by our people in those markets. We are going to do whatever it takes to be a big player in that market. The first (of such) markets we are ambitious about is Latin America.

We want to be number 1 or number 2 in every market in the mid-size category (250 to 750 cc). We want to be a significant motorcycle player and we want to grow the size of the market we enter. We have a decent distribution network in the developed markets. We believe the future in terms of scale will come from the developing markets… Wherever we go, our focus will be on quality and depth instead of merely adding more countries.

You have launched the Continental GT in India at an attractive price. It is a unique concept. Will it work?

For us, it is really about the types of motorcycles we make. Cafe Racing was the natural extension. We also saw people enjoying sporty bikes. This has been the trend since the start of motorcycling. In our opinion, the (demand for) sporty bikes has peaked. Because of the peculiar demography and the ecosystem, people are willing to step back and have different sort of fun. It is not about extreme performance culture alone.

Is Continental GT the beginning? Are more new generation products lined up?

We are working on many new projects… The idea is to serve the mid-size market. We are certainly exploring new models and we have a solid product plan ready till 2020. It will involve other platforms, but these are in the future. We have developed in-house capability to design products from scratch. We are constantly learning the art of developing engines. Now we have developed a full new chassis, which is state-of-the-art. We have the confidence to develop in-house design capabilities.

Is this the transformation of Enfield in India?

We are just getting started, the best is yet to come. Our business model works. On margins, we are among the most profitable automotive companies in the world.

You have been growing over 50% in the last three years. Any plan to increase capacity?

Our paint lines, engine machining lines are running in three shifts and some of the assembly lines, which are labour-intensive, are running on two shifts, because we have added more capacity recently. The bottleneck is at the suppliers end. When we had announced our new plant in 2012, we planned to make 1,50,000 units. We were able to increase that to 1,75,000 in 2013. We may exceed that number. In 2014, our capacity will reach 2,50,000 units. We are already seeing demand far exceeding that potential.

With the addition of capacity, will the waiting period reduce?

It is difficult to forecast what the demand would be. Our supply chain and operation is doing what it can to deliver more bikes. We have tested it in certain cities, just to see what the real demand is. We reduced the waiting period in one of the cities by supplying more bikes. We saw that the fallout rate was 15-20%, which is the number of people who would have bought our bikes, but are not buying due to the waiting period. This shows the latent demand we have out there.

Anoop Prakash, head of Harley Davidson India, recently said all Royal Enfield users are his future prospective customers. As more alternatives emerge in the market, how do you plan to keep the Royal Enfield customers in your own fold?

We don’t intend to be the only one in the market; we think there is a lot of space for motorcycle manufacturers. There will be many others in the market and they have their own way of operating. We are confident with our approach. So when the market grows, it is going to benefit us as well. The type of motorcycle and type of culture that we have created is extremely different. Our bikes are much more accessible in price or usability. If you have a huge fat ungainly cruiser, it does not work in the normal Indian environment. What I believe ends up happening is that lot of the larger bikes are bought by posers in India. Most of them are people who are not using their bikes, they just want to have something flashy in their garage. Fair enough, we dont want to be in that category at all. We want to have products that begs to be ridden all the time, and our users are riding our bikes everyday. We aren’t complacent on competition front. What we are creating is not a me-too brand; we want to develop our brand in a very different way.


(Raj Panda) #18

Was just reading the thread on “success pattern” and trying to see if the Story of Eicher has any resemblance to any of vp success stories. Get a feeling this story has some resemblance to the Astral story in these aspects.

1). Huge size of opportunity )- RE’s annual sales figures are close to half the number of monthly sales figure of Bajaj Auto (includes exports) and 1/4th the monthly Hero sales numbers. Not trying to say, that all of the Hero & Bajaj customers are prospective RE customer’s. But given the waiting period, there is surely a bigger prospective customer list who are not queuing up just because they don’t like to wait.

Some 5 years back i too had made an attempt to own a RE Thunderbird albeit half heatedly. My impression then was, it’s a very difficult to maintain & expensive bike not fit for commuting. Things seem to have changed on that front.

2.** Monopoly of the 250cc to 750 cc bike ******segment **in India - **The new entrants like Harley & Triumph are just testing the waters. In addition we might have good demand from export market now that Eicher is looking to it.

3). **Focus on innovation : Cafe GT is evidence of that. From Mgmt comments: Eicher truck & bus range is going to revamped this December. Exploring new models and we have a ** solid product plan ready till 2020. Have developed in-house capability to design products from scratch. Constantly learning the art of developing engines. Now we have developed a full new chassis, which is state-of-the-art. We have the confidence to develop in-house design capabilities.

**4). Positive feedback loop from every level - **From what i see around me, customers are a great deal satisfied. Haven’t heard of any employee issues being reported from Eicher factories when others like Bajaj,Maruti are facing some kind of labor issues. Page 13 of FY-12-AR shows a big half page picture of a senior employee rolling out the 100000th RE vehicle from plant. Doesn’t mean a lot, but sometimes small gestures do matter. Overall things look great. I plan to do some dealer feedback next April. If someone can help in this regard it will be great. Have heard many interviews of Mr. Lal and am impressed with this line of thought.

5). **Ability to take price hikes on regular basis - Need to find more on this.
**


(Raj Panda) #19

To me this company looks good to do 25% compounding in earning for next 3 years at least.

But the main problem is price, if we estimate the full year CY13 EPS to be ~140 (9Months EPS is 110) then at 4800 it’s already quoting at ~34 PE current year. When i started the discussion at ~4100 it was 29 times estimated earnings and looked expensive to me. So i took only a starter position.

But then, what if the near future growth is the higher than 25% ? RE’s numbers have been growing at ~50% for last 3 years and the share of it’s numbers in consolidated number’s as pointed earlier is increasing consistently.

Views on, at what price to accumulate are welcome :slight_smile:


(Hitesh Patel) #20

Raj,

For similar kind of valuations or slightly expensive valuations, when you are getting Page Inds, why bother about eicher? I would buy eicher if at all when it is in my valuation comfort zone.

I dont track eicher fundamentally too much but looking at the last post and valuations u put up I feel instead of eicher, page even after the run up might be a better choice.

Still better is Gruh finance… its a 25% grower available at attractive valuations… Stock has been range bound after strong run up in the past… Its in a sideways corrections as valuations catch up with stock price… AFter this there will be a strong run up again. I think gruh is on the verge of another run up.

regards

hitesh.