EICHER MOTORS LTD

Result Update: Q4 CY13

ISIN: INE066A01013 STOCK DETAILS Sector BSE Code Face Value 52wk. High / Low (Rs.) Volume (2wk. Avg ) Market Cap ( Rs in mn ) Years Net Sales EBITDA Net Profit EPS P/E
CY13A 17024.70 3938.30 2786.20 103.04 47.17

Recommend
CMP Target Price

BUY
4860.00 5248.00

FEBRUARY 14 , 2014
Automobile 505200 10.00 5294.95/2512.00 5050 131268.60
CY14E 21791.62 4311.80 3002.88 111.18 43.71 CY15E 25932.02 4702.81 3270.03 121.07 40.14

th

SYNOPSIS
Eicher Motors Ltd designs, develops, manufactures, and markets trucks & buses, motorcycles, automotive gears & components in India and internationally. The company net profit jumps to Rs.744.30 million against Rs.341.60 million in the corresponding quarter ending of previous year, an increase of 117.89%. Revenue for the quarter rose by 77.92% to Rs.5278.80 million from Rs.2967.00 million, when compared with the prior year period. The operating profit recorded an increase of 140.17% at Rs. 1075.70 million in Q4 2013 over Rs. 447.90 million in Q4 2012. The Company has posted a net profit after tax of Rs. 2786.20 million for the Year ended December 31, 2013 as compared to Rs. 1447.60 million for the Year ended December 31, 2012.

Annual Estimated Results (A*: Actual / E*: Estimated)

Shareholding Pattern (%)

1 Year Comparative Graph

During the year CY2013, Total Income has increased to Rs. 17825.70 million from Rs. 10950.40 million in CY2012. Eicher Motors has recommended 300% dividend on the equity share capital (Rs. 30/- per share). The Company has unveiled its entire new range of future generation trucks and buses. Net Sales and PAT of the company are expected to grow at a CAGR of 35% and 31% over 2012 to 2015E respectively.

EICHER MOTORS LTD

S&P BSE SENSEX

PEER GROUPS COMPANY NAME Eicher Motors Ltd Hero MotoCorp Ltd Tata Motors Ltd Bajaj Auto Ltd

CMP (Rs.) 4860.00 1955.25 384.10 1859.25

MARKET CAP Rs. in Mn. 131268.60 391387.50 1235162.80 539872.00

EPS (Rs.) 103.04 106.61 2.61 112.15

P/E (X) Ratio 47.17 18.38 147.03 16.64

P/BV(X) Ratio 16.00 7.82 6.45 6.83

DIVIDEND (%) 300.00 3000.00 100.00 450.00

FINANCIAL HIGHLIGHTS (STANDALONE) Results updates- Q4 CY13, The Eicher Group has diversified business interests in design & development, manufacturing and local/ international marketing of Trucks & Buses, Months Net Sales PAT EPS EBITDA Dec-13 5278.80 744.30 27.53 1075.70 Dec-12 2967.00 341.60 12.65 447.90 % Change 77.92 117.89 117.56 140.17

Motorcycles, Automotive Gears and components, reported its financial results for the quarter ended 31st Dec, 2013.

The company net profit jumps to Rs.744.30 million against Rs.341.60 million in the corresponding quarter ending of previous year, an increase of 117.89%. Revenue for the quarter rose by 77.92% to Rs.5278.80 million from Rs.2967.00 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.27.53 a share during the quarter, registering 117.56% increase over previous year period. Profit before interest, depreciation and tax is Rs.1075.70 millions as against Rs.447.90 millions in the corresponding period of the previous year.

Expenditure:

During the quarter total expenditure raised by 61 per cent mainly an increase in Material Consumed Cost along with consideration of depreciation in the rupee impact. Total expenditure in Q4 CY13 was at Rs. 4312.90 millions as against Rs. 2672.70 millions in Q4 CY12. Consumption of Raw Materials cost stood at Rs. 3290.50 millions against Rs. 2036.30 millions in the corresponding period of the previous year. Employee Benefit Expenses was at Rs. 321.70 millions and other expenditure at Rs. 757.50 millions in Q4 CY13 are the primarily attributable to growth of expenditure.

Latest Updates Eicher Motors Ltd has recommended 300% dividend on the equity share capital (Rs. 30/- per share). During the current quarter, 23,500 equity shares were issued and allotted as fully paid up at an exercise price of Rs. 462 (including premium of Rs. 452 each) per equity share and 6,400 equity shares were issued and allotted as fully paid up at an exercise price of Rs. 297 (including premium of Rs. 287 each) per equity share under Eicher Employee Stock Option Scheme. Eicher Motors Ltd has unveiled its entire new range of future generation trucks and buses. On display were 11 new products covering the entire 5 to 49 tonne gross vehicle weight range. The Company has posted a net profit after tax of Rs. 2786.20 million for the Year ended December 31, 2013 as compared to Rs. 1447.60 million for the Year ended December 31, 2012. Total Income has increased from Rs. 10950.40 million for the Year ended December 31, 2012 to Rs. 17825.70 million for the Year ended December 31, 2013.

Company Profile
Eicher Motors Limited (EML) is the flagship company of the Eicher Group, which was a catalyst in the green revolution in India with the production of Indias first agricultural tractor in 1959. EML is now a leading player in the Indian automotive space. Its 50-50 joint venture with the Volvo group, VE Commercial Vehicles Limited, designs, manufactures and markets reliable, fuel-efficient trucks and buses; and is leading the path in driving modernization in commercial transportation in India and other developing markets. Eicher Motors also owns the iconic Royal Enfield motorcycle business, which leads the premium motorcycle segment in India. The oldest motorcycle company in continuous production world-wide, Royal Enfield has witnessed a huge surge in demand in the recent past, and is charting its course to be the leading player in the mid-size motorcycle segment globally. EMLs 50:50 strategic joint venture with US based Polaris Industries Inc., Eicher Polaris Private Ltd. is in start-up phase, and is currently designing and developing, and will soon manufacture and sell a full new range of personal vehicles. In 2012, Eicher Motors recorded its highest ever sales of INR 7,000 crores (USD 1.3 billion). Royal Enfield has also substantially expanded and upgraded its network across the country. In 2012 it added 63 new dealerships taking the total dealership network to 249. Over 85 executives work exclusively in the area of R&D. Product development and product-engineering facilities are available at each of Eichers major manufacturing locations. Expertise has been developed in the areas of design and development of Trucks & Buses, Automotive transmission, Electronic instrumentation, Material science, Metrology as well as prototype manufacturing and testing.

Products:
Motors It manufactures several kinds of commercial vehicles with gross vehicle. It has technical and financial collaboration with Mitsubishi Motors Corporation of Japan which led to manufacturing of CANTER range of vehicles. Motorcycles It manufactures bullet motorcycles Royal Enfield. It manufactures six different models ranging from 300cc to 600cc. The manufacturing plant has installed capacity of 39,000 motorcycles per annum. Engineering Components The company manufactures complete range of automotive gears. The range of gears includes Spiral bevels (Crown wheel and pinions), Straight bevels and Transmission gears.

Financial Highlight STANDALONE

Balance sheet as at December 31st, 2012-2015E (A*- Actual, E* -Estimations & Rs. In Millions) EICHER MOTORS LTD. SOURCES OF FUNDS Shareholder's Funds Share Capital Reserves and Surplus 1. Sub Total - Net worth Non Current Liabilities Deferred Tax Liability (net) Other Long term Liabilities Long Term Provisions 2. Sub Total - Non Current Liabilities Current Liabilities Short term borrowings Trade Payables Other Current Liabilities Short Term Provisions 3. Sub Total - Current Liabilities Total Liabilities (1+2+3) APPLICATION OF FUNDS Non-Current Assets a) Fixed Assets (Including Capital Work in Progress) b) Non-current investments c) Long Term loans and advances d) Other non-current assets 1. Sub Total Non Current Assets Current Assets Current Investments Inventories Trade receivables Cash and Bank Balances Short-terms loans & advances Other current assets 2. Sub Total - Current Assets Total Assets (1+2) 6384.50 754.10 62.00 35.00 239.40 2.90 7477.90 10242.40 8254.10 1438.40 121.30 187.10 487.40 4.30 10492.60 14831.80 9574.76 1754.85 152.84 224.52 594.63 4.99 12306.58 18067.29 10915.22 2065.85 183.41 260.44 856.26 5.99 14287.17 21528.07 200.10 1775.00 1168.10 621.20 3764.40 10242.40 40.00 3214.20 2114.90 980.40 6349.50 14831.80 48.40 3921.32 2474.43 147.06 6591.22 18067.29 56.14 4313.46 2672.39 161.77 7203.75 21528.07 62.60 32.30 92.60 187.50 126.30 37.80 104.80 268.90 101.04 43.47 115.28 259.79 88.92 48.69 124.50 262.10 270.00 6020.50 6290.50 CY12A CY13A CY4E (Rs.in.mn) CY15E

270.40 7943.00 8213.40

270.40 10945.88 11216.28

270.40 13791.81 14062.21

1980.30 109.40 613.00 61.80 2764.50

3131.70 309.40 827.20 70.90 4339.20

4278.52 386.75 1017.46 77.99 5760.72

5476.51 479.57 1200.60 84.23 7240.90

Annual Profit & Loss Statement for the period of 2012 to 2015E Value(Rs.in.mn) Description Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Reserves Face value EPS CY12A 12m 10492.60 457.80 10950.40 -9038.30 1912.10 -2.60 1909.50 -171.50 1738.00 -290.40 1447.60 270.00 6020.50 10.00 53.61 CY13A 12m 17024.70 801.00 17825.70 -13887.40 3938.30 -2.70 3935.60 -304.10 3631.50 -845.30 2786.20 270.40 7943.00 10.00 103.04 CY14E 12m 21791.62 280.35 22071.97 -17760.17 4311.80 -3.29 4308.50 -383.17 3925.34 -922.45 3002.88 270.10 10945.88 10.00 111.18 CY15E 12m 25932.02 294.37 26226.39 -21523.58 4702.81 -3.89 4698.92 -452.14 4246.79 -976.76 3270.03 270.10 13791.81 10.00 121.07

Quarterly Profit & Loss Statement for the period of 30th June, 2013 to 31st March, 2014E Value(Rs.in.mn) Description Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Face value EPS 30-Jun-13 3m 3818.20 77.10 3895.30 -3137.40 757.90 -0.30 757.60 -75.30 682.30 -156.10 526.20 270.10 10.00 19.48 30-Sep-13 3m 4589.70 21.20 4610.90 -3704.70 906.20 -0.50 905.70 -80.00 825.70 -207.80 617.90 270.10 10.00 22.88 31-Dec-13 3m 5278.80 20.80 5299.60 -4223.90 1075.70 -1.40 1074.30 -89.00 985.30 -241.00 744.30 270.40 10.00 27.53 31-Mar-14E 3m 5753.89 33.70 5787.59 -4649.14 1138.44 -1.12 1137.32 -103.24 1034.08 -237.84 796.24 270.40 10.00 29.45

Ratio Analysis Particulars EPS (Rs.) EBITDA Margin (%) PBT Margin (%) PAT Margin (%) P/E Ratio (x) ROE (%) ROCE (%) EV/EBITDA (x) Book Value (Rs.) P/BV Charts CY12A 53.61 18.22% 16.56% 13.80% 90.65 23.01% 32.10% 68.71 232.98 20.86 CY13A 103.04 23.13% 21.33% 16.37% 47.17 33.92% 51.40% 33.33 303.75 16.00 CY14E 111.18 19.79% 18.01% 13.78% 43.71 26.77% 41.68% 30.40 415.25 11.70 CY15E 121.07 18.14% 16.38% 12.61% 40.14 23.25% 36.51% 27.87 520.62 9.34

Outlook and Conclusion At the current market price of Rs.4860.00, the stock P/E ratio is at 43.71 x CY14E and 40.14 x CY15E respectively. Earning per share (EPS) of the company for the earnings for CY14E and CY15E is seen at Rs.111.18 and Rs.121.07 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 35% and 31% over 2012 to 2015E respectively. On the basis of EV/EBITDA, the stock trades at 30.40 x for CY14E and 27.87 x for CY15E. Price to Book Value of the stock is expected to be at 11.70 x and 9.34 x respectively for CY14E and CY15E. We recommend BUY in this particular scrip with a target price of Rs.5248.00 for Medium to Long term investment. Industry Overview India represents one of the worlds largest automobile industries. Easy availability of finance and rising income levels are encouraging the middle class population to upgrade their two wheelers to a car. Besides, the growing organised used car market has also been a positive growth factor in the used car market of the country. Driven by the above factors, the used cars market is anticipated to grow at a compound annual growth rate (CAGR) of 16 per cent during 201317. India is quietly becoming a production hub of high-end vehicles meant for export to China. The US-based motorbike maker Harley Davidson, Austrian motorcycle manufacturer KTM and Mahindra & Mahindra have also preferred to set up manufacturing facilities in India than in the relatively low-cost China and export the output. Furthermore, India is set to become Mercedes Benzs fastest-growing market worldwide ahead of China, the US and Europe, according to internal projections. Key Statistics The passenger vehicles production in India touched 3.23 million units in 201213 and is expected to reach 10 million units by 202021. The industry is estimated to grow at a CAGR of 13 per cent during 20122021. In addition, the industry recorded exports worth US$ 9.3 billion in 201213 and is projected to touch US$ 30 billion by 202021, according to Automotive Component Manufacturers Association (ACMA).

The cumulative foreign direct investment (FDI) inflows into the Indian automobile industry during April 2000 to October 2013 was recorded at US$ 9,079 million, amounting to 4 per cent of the total FDI inflows (in terms of US$), according to Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce, Government of India. India is also expected to emerge as a centre for producing compact superbikes as Indian customers progress to the next level of biking. Several global and Indian bike makers plan to utilise India's mass-production base of 16 million two-wheelers to roll out sports bikes in the 250 cc capacity. More so, the demand for premium sports utility vehicles (SUVs) will continue to grow. The market size of premium SUVs was estimated to be around 25,000 units annually in India. Major Developments & Investments

Tata Motors Ltd plans to invest about 30 million (US$ 49.17 million) in the National Automotive Innovation Campus (NAIC) for research and development (R&D). The investment would be made through its subsidiary Tata Motors European Technical Centre (TMETC) at the University of Warwick campus, UK.

Volvo India Pvt Ltd plans to set up truck and bus manufacturing facility in Malur, Karnataka, with an investment of Rs 974 crore (US$ 158.32 million). The facility is expected to give employment to about 2,125 people.

Manufacturing companies in Japan continue to view India as the top destination for investmentsover China, Thailand, Vietnam, Brazil and Indonesiain the next three years, according to Mr Masanori Nakano, Consul General of Japan in Chennai.

Tata Motors-owned Jaguar Land Rover (JLR) has entered into an agreement with the state of Rio de Janeiro to build a manufacturing plant in Brazil with an investment of Rs 4,626 crore (US$ 751.95 million).

JBM Auto has formed a joint venture (JV) with Italian bus maker BredaMenarinibus to manufacture luxury buses in India. The IndoItalian venture plans to set up a plant at Kosi, near Faridabad in Haryana, and produce 2,000 buses every year initially, at an investment of Rs 500 crore (US$ 81.27 million).

Mahindra & Mahindra (M&M) plans to develop the world's first hybrid technology that can be deployed in vehicles with manual transmission and enhance fuel efficiency by almost 20 per cent.

Amtek Auto has signed an agreement to buy Germany-based Kuepper Group of companies for about 200 million (US$ 272.73 million) in its second big European acquisition in 2013.

Honda Cars India will use the Ennore Port to export cars to South Africa. The infrastructure for car exports at Ennore Port is attractive and cost effective.

Government Initiatives The Government of India plans to introduce fuel-efficiency ratings for automobiles to encourage sale of cars that consume less petrol or diesel, according to Union Ministry of Petroleum and Natural Gas, Government of India. The Union Budget 201314 added some incentives to the industry.

The period of concession available for specified part of electric and hybrid vehicles till April 2013 has been extended up to March 31, 2015.

The basic customs duty (BCD) on imported luxury goods such as high-end motor vehicles, motor cycles, yachts and similar vessels was increased. The duty was raised from 75 per cent to 100 per cent on cars/motor vehicles (irrespective of engine capacity) with CIF value more than US$ 40,000; from 60 per cent to 75 per cent on motorcycles with engine capacity of 800 cc or more and on yachts and similar vessels from 10 per cent to 25 per cent.

In addition, an increase in excise duty from 27 to 30 per cent has been allowed for SUVs with engine capacity exceeding 1,500 cc, while excise duty was decreased from 80 to 72 per cent, in case of SUVs registered solely to be used for taxi purposes.

An exemption from BCD will be provided to lithium ion automotive battery for manufacture of lithium ion battery packs for supply to manufacturers of hybrid and electric vehicles.

The excise duty on chassis of diesel motor vehicles for transport of goods reduced from 14 per cent to 13 per cent.

The Government of India allows 100 per cent FDI in the automotive industry through automatic route. Road Ahead The vision of Automotive Mission Plan (AMP) 20062016 expects India, to emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of US$ 145 billion; accounting for more than 10 per cent of the gross domestic product (GDP) and providing additional employment to 25 million people by 2016. With special focus on exports of small cars, multi-utility vehicles (MUVs), two and three wheelers and auto components; the automotive sectors contribution to the GDP is expected to double reaching a turnover worth US$ 145 billion in 2016, according to the AMP 20062016.

Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.

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