EIM’S 2Q EBITDA was down 13% YoY but 20% ahead of our estimates. EBITDA/vehicle was flattish at RE and
higher in CVs on YoY basis, despite lower volumes and BS6 cost push. Demand commentary was positive and
RE has 125K bookings but company added the model specific supply constraints are limiting production
rate.
The new Meteor has 8K bookings so far and is seeing good traction for personalisation options. We raise FY21-
23 EPS by 4-9% and retain Buy. Weak 2Q but positive surprise on margins. Royal Enfield’s (RE) 2Q volumes fell 10% YoY but EBITDA/vehicle was commendably flattish YoY despite lower volumes and BS6 cost push. RE’s 2Q
EBITDA margin came in at 22.8% (down 220bp YoY) while Ebitda was down 11% YoY. VECV (commercial vehicle
business) volumes fell 28% YoY but EBITDA/vehicle was up 56% YoY driving 12% YoY growth in EBITDA; VECV
remained loss making in 2Q though.
EIM 2Q consolidated net profit was down 40% YoY pulled down by lower financial income and higher tax rate (2QFY20 was abnormally low). RE seeing good demand and buildup of waitlist. Eicher said that RE is seeing good demand momentum and has 125K bookings, but model specific supply constraints are limiting production rate. Digital engagement has risen sharply amid Covid-19 and two out of every three inquiries are now online; conversion rates for digital inquiries has improved from ~3% in the past to 13-14% now.
Start of RE product cycle. RE launched a new 350cc cruiser motorcycle, Meteor, on 6 November, replacing the erstwhile Thunderbird model. Meteor has received 8K bookings in the first few days of launch is seeing good traction for its personalization options.
The launch of Meteor marks the start of RE’s aggressive product cycle where it plans to introduce 2-3 new platforms, along with product upgrades, variants, facelifts, and limited-edition vehicles in coming years.
A big dealer network expansion is also under way, mainly targeting semiurban and rural markets, which should also boost growth.
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