Eicher Motors (EICHER) Q2FY22 results were ahead our expectations primarily on account of sharper rise in average realizations and improvement in EBITDA margins.  The Company expressed high optimism on export market front and sounded positive growth outlook in domestic market despite. EICHER has received very encouraging response to its newly launched Classic 350 towards new bookings.

"In export market, the Company dispatched ~40,000 units in H1FY22 which is way higher compared to FY19 full year volumes. We have introduced our FY24 estimates wherein the Company is expected to report EPS of Rs117. We maintain our HOLD rating with revised price target of Rs 2,926 (PER of 25x FY24E earnings)," stated IDBI Capital Equity Research.

Key highlights and investment rationale

Q2FY22 Result Highlights: During Q2FY22, EICHER sales grew by 5.4% YoY to Rs 22.5 billion (our Estimates Rs 19.7 billion), purely driven by 14.1% increase in average realizations QoQ. The improved in average realization per bike in Q2FY22 was mainly supported by improved product mix in international markets and rise in spares revenue. EBITDA margins contracted by 119bps YoY to 20.9% (Our Estimates 17.6%) on account of improvement in Gross Margins and lower staff cost. PAT increased by 8.7% YoY to Rs 3.7 billion (Our Estimates Rs 2.3 billion). The Company has witnessed strong response to its newly launched Classic 350. The stores network of EICHER stands at 1053 and studio stores at 1,052 across 1,750 cities.

Earning Revision: Although Q2FY22 results were ahead of our estimates, we would like to see sustainability of the same in coming quarter before revising the estimates. We have introduced FY24 estimates wherein the Company is expected to report EPS of Rs117.

Outlook and Valuation: We expect, EICHER to report 15.2% volume CAGR and 33.6% PAT CAGR over FY21-24E. At CMP of Rs 2,522 EICHER stock is quoting at PE of 21.5xFY24E earnings. We maintain our Hold rating with revised price target of Rs2,926 (PER of 25x FY24E earnings).

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