Emkay Global Financial is bullish on Eicher Motors has recommended buy rating on the stock with a target price of Rs 3040 in its research report dated August 13, 2021.
Broker Research
August 13, 2021 / 03:09 PM IST
An Edelweiss research report for Q4FY21 says road tonnage continued to improve, evident in e-way bill generation (up 6% QoQ) and improved core trucking rentals. “We estimate tonnage would increase by three–five percent for truckers. Asset-light plays Mahindra Logistics and TCI Express remain our preferred picks due to their ability to scale up/down as the environment demands,” the report said. Edelweiss is bullish on Blue Dart Express due to the pandemic-induced boom in e-commerce and its leaner cost structure. It has retained a ‘buy’ call on Mahindra Logistics, TCI Express and Blue Dart Express.
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Emkay Global Financial’s report on Eicher Motors
Q1FY22 EBITDA margin stood at 18.4%, beating our estimate of 17.9%, owing to inventory gains. Revenue came in at Rs19.7bn, slightly above our estimate of Rs19.3bn, thanks to higher-than-expected realizations. Management expects supply disruptions due to the shortage of semiconductors. Factoring in supply issues and slower ramp-up, we reduce FY22/23/24 EPS estimates by 28%/12%/7% to Rs71.2/Rs114/Rs144.1. Despite the cut in estimates, we expect a robust earnings CAGR of 42% over FY22-24E, supported by a sales upcycle, increasing share of premium motorcycles and margin expansion. New products remain a focus area, with the expectation of one new model or major refresh every quarter.
Outlook
While we do not see any fundamental change in the company’s strategy and direction, the sudden resignation of professional CEO may lead to heightened perception about key person risk. Any correction in the stock price could provide an opportunity to accumulate. We retain Buy with TP of Rs3,040 (Rs3,180 earlier), based on 24x P/E for the 2W business on Sep’23E EPS (25x Mar’23E earlier).
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