Thanks @ashkrithik!
On the margins front, Eicher is already going through operating de-leverage phase and its margins are coming down. You can observe it in Q1FY20 results. So when the growth phase is back, margins will expand. And the revenue mix from exports and 650cc twins will only push the margins further up. I think the revenue mix from exports and 650cc twins will more than compensate for the margins of 250cc bike, if they will launch it.
Regarding EV, I’ll keep an eye but I’m not super worried. The first ones to be affected would be the bikes below 150cc, then 150cc to 250cc and finally 250cc+ versions. So Eicher will have time in its pockets. Good for us! And having spent some time on studying Ashok Leyland, I believe Vinod Dasari is an insane innovation engine and will eventually sail through this. He has developed a new technology called iEGR for BS-IV transition which is very Indian market specific while other players just copied SCR from Europe and implemented it in India. You can go through my post on his innovation at Ashok Leyland here to find out more: Ashok Leyland - A major CV player
On PE Expansion, I think there is some scope for it from current levels. Both Eicher and Maruti are very richly valued by the market given their historic track record. If they trade at 20 PE even during such bad times and uncertainty, shouldn’t they be trading at much higher valuations when the good times are back? Another way to think is if a company is showing good revenue growth and margin growth, wouldn’t it PE ratio expand?
Though the story looks excellent to me, one thing to remember is there are not many players in Indian automobile history to have succeeded outside India in exports, including good companies like Maruti Suzuki, Ashok Leyland. Bajaj is doing well in both 2W and 3W and that gives me some hope.
Disclosure: Initiated 2% position in Eicher Motors in last 30 days. Might consider buying more in the following months. Investor shall do his own due diligence before taking his decision and understand that this is not a buy / sell recommendation