Conference call highlight:
- Opening Remark by Mr. Lal on RE: Highest ever margin in RE at > 30% EBITDA level. The company has started working on third plant capacity. Siddharth Lal was confident to reach production of 675000 by end of FY17. The waiting period is around 3 months which varies across region and model. As on date total 566 dealers for RE. Open a new store in Manila. Technology centre in Chennai is expected to start in 1 year while UK would be ready by early 2017. Himalaya model is extremely well received by the market. Booking for Himalaya is now open to all centres in India. This year the company successfully completed 13 edition of Himalayan Odyssey with more than 100 bikers participating. This time specific woman only Odyssey was introduced with support service staff of woman. Nearly 20 woman participated in the event. In June 2016, Participated in Event organised in South France where is shown two customised bikes of RE which was very much appreciated by the visitors. Outlook for RE remain extremely strong.
- Opening remark by Mr Lal on VECV: The company has maintained market share in almost all segment. It launched Sub <5 tonne segment a new product where it traditionally has no presence and within quarter captured around 15% market share in that segment. 5-15 tonnes segment is Eicher stronghold and continue to show good growth. It has all three months of quarter reported sales > 1,000 units per month which was number the company was aiming to achieve almost for 5-6 years. In Bus, Eicher lost market share marginally. The medium duty engine sales was 4622 unit which was 6.2% growth over last year. In Exports, industry growth was around 20%, while Eicher growth was very high at around 92%. (Not sure for 92% number)
- Eicher Polaris: Now has presence across 60 locations in 8 states, Getting momentum in target market.
Question and answer key highlights:
- Despite 2% growth in CV industry growth in June and news of decline in freight rate, the company expect some issue in Heavy Duty vehicle. In Medium duty vehicle, it expect growth momentum to continue. In Heavy duty also, it has only 6% market share and significant scope for growth higher than industry rate by capturing market share with new product launchs.
- RE growth is now driven significantly tier 2 and semiurban/rural area. the company is increasing attempting to increase service center and dealer network in those market. The company aims within short period, sales of around 15-20 vehicle for a new dealer as that level it make sustainable business for dealer and hence long term growth for the company. The company does not intends to increase sales growth through customization as currently main focus is on driving production and maintaining sales growth in domestic market. It intend to change to Engine for RE as well as for VECV to comply with new environment norms.
- The company did face some minor problem in Himalyan model. Out of 2000 model, nearly 15-20 model need some service update. The company took initiative to address the issue which has in turn increase goodwill of the company among the customer. The potential target audience for Himalyan would be typical < 150 CC driving person or also current RE user who want to upgarde and get aspire by adventure bike.
- The company does not intend to launch economic segment in order to stop customer switching due to waiting period. It rather would attempt to address supply side.
- In global market, the company has just launched product in past year and hence small losses are reported by subsidiary in Barzil. The company want customer to enjoy ride and get market feedback. Once it get feedback, it would export bike from India and over a period of time may look at manufacturing part of of bike in that particular country.
- Exclusive gear stores are expected to contribute to sales growth in medium term. It also intend to increase service centre along with dealership to give complete satisfaction to the enduser.
- In product mix, > 500 CC growth has almost remain stagnant at around 11,000 units. The increase in Rural market (with low per capita income and hence potential of lower price bike) and also dealers familiarly with Classic were two main factors. The company is addressing same by training dealers.
There might be some error in my end while transcribing the note. The reader shall do its own due diligence before making any investment.
Discl: Eicher is my largest holding, and sold less than 5% of my holding during last month. My view may be biased due to my interest.