DSIJ Mindshare

Q1 2013: Eicher Motors’ Volumes Hit; Market Share Increases

Eicher Motors announced its Q1 2013 (quarter ended March 2013) numbers on May 13, 2014, post market hours. The company’s volumes have taken a hit and consolidated margins have faced pressure. At the same time, the revenue growth has been moderate. But in this cyclic downturn in the commercial vehicle market, Eicher Motors has in fact outperformed.

In Q1 2013, revenues of Eicher Motors grew by a moderate 3.36% to Rs 1724.3 crore as compared to Q1 2012. Its EBIT declined by 12% to Rs 143 crore and net profit by 18.73% to Rs 132.8 crore.

In Q1 2013, domestic sales volumes of Eicher Motors declined by 11.74% to 11936 units, on a yearly basis. At the same time, exports declined by 32.74% to 452 units. This resulted in an overall decline in sales volume of 12.32%.

The company saw an ultimate robustness in the sales of Royal Enfield motorcycles. In the quarter under review, the sales volumes of Royal Enfield increased by 45.34% to 34736 units. For long, the demand for Royal Enfield motorcycles has far exceeded its supply. Waiting periods for the delivery of these motorcycles have been more than 12 months.

Royal Enfield began production of motorcycles at its second plant at Oragadam. The first phase of this new plant has resulted in the total production capacity from both plants reaching 175000. Work has begun on the second phase of expansion which will take the cumulative capacity to 250000 by 2014. The master plan is to eventually take production up to 500000 units per annum.

The cyclic downturn in the commercial vehicle industry has affected sales massively. Rising fuel costs, high interest rates and lower industrial, construction and mining activity have all led to a massive dip in demand. This has been reflected in the figures of all major truck manufacturers. It can also be seen from the sales volumes of Eicher Motors.

But let’s have a look at the market share of Eicher Motors. In Q1 2013, the domestic market share of Eicher Motors increased to 13.9% from 11.1% in Q1 2012. It saw growth in market share in all the segments it operates in. Its market share in heavy duty trucks increased to 4.9% from 3.3%, in light and medium duty trucks to 30.8% from 29.8% and in buses to 12.3% from 9.3%.

Although the financials of Eicher Motors have not been too impressive and sales volumes have declined, the company has seen a gain in its market share. This clearly indicates that the company has outperformed its peers. A change in the macroeconomic situation will improve the scenario for commercial vehicle manufacturers. More importantly, it will result in a much better performance by Eicher Motors.

Moreover, sales of Royal Enfield have been extremely robust. The company is also making capacity additions to cope with the demand for Royal Enfield making the future prospects bright. We have been bullish on the prospects of Eicher Motors and the above reasons make us maintain our outlook on the company.

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