Institutional Equities Eicher Motors 18 July 2017 Reuters: EICH.NS; Bloomberg: EIM IN Aspire The Bike, Aspire The Stock! BUY We initiate coverage on Eicher Motors (EML) with a Buy rating as we believe its growth momentum will continue over FY18/FY19. We expect 20% volume CAGR for Royal Sector: Automobiles Enfield, over FY17-19E. In terms of demand, we believe the demand in leisure bike and CMP: Rs28,059 premium segments will continue to remain strong as the existing two-wheeler base (~70mn) moves towards better and high-end products. Royal Enfield’s EBITDA margin at Target Price: Rs32,566 31% is the best in the industry, which we believe will expand further by ~120bps over FY18E/FY19E as better economies of scales leads to further margin expansion. The Upside: 16% company plans to add ~300 dealers over FY18E/FY19E (~40% growth over FY17 number) Gaurant Dadwal which coupled with the launch of new bikes (two new launches in FY18/FY19) should Research Analyst result in demand remaining strong for another two years. We have assigned Buy rating to EML with a SOTP-based target price of Rs32,566, up 16% from the current market price
[email protected] (35x FY19E EPS of Royal Enfield and 15x FY19E EPS of VECV). +91-22-3926 8145 Volume growth expected to continue: Royal Enfield’s volume growth in the past few years has been phenomenal, posting 51% CAGR over FY11-FY17. Consistent strong demand has Vivek Sarin outpaced supply resulting in a strong order book for the company which currently stands at ~1.5 Research Associate – 2.0 months.