EICHERMOT - Eicher Motors Ltd. Share Price

Management provided a positive outlook for Eicher Motors, emphasizing strong business performance as they entered the new financial year after a solid FY24-25 finish. The company reported record Q1 revenue of INR 5,042 crores, marking a growth of 14.8% from INR 4,393 crores last year. EBITDA was noted at INR 1,203 crores compared to INR 1,165 crores in the previous year, and PAT increased to INR 1,205 crores, up 9.4% from INR 1,101 crores.

Key forward-looking points include:

1. Royal Enfield Performance: The company sold 261,326 motorcycles in Q1, a growth of 14.7% YoY, with domestic sales contributing 228,779 units (up 11.8%) and international sales climbing by 41.2% to 32,547 units. Royal Enfield maintains an impressive 87.3% market share in the middle-sized motorcycle segment.
2. Expansion Initiatives: New product launches such as the Hunter 350 have garnered strong consumer interest, targeted towards a younger demographic (ages 24-26). The company is also expanding its CKD facilities, particularly in Brazil, which is seen as a market with high growth potential.
3. Environmental Commitment: Management shared significant progress in sustainability, including sourcing 84% of operational electricity from renewable sources and reducing emission intensity by 51%, alongside a water positivity index of 4.3.
4. VECV Growth: VECV reported 21,610 unit sales, exceeding previous records and reflecting strong performance across all commercial vehicle segments. Q1 revenue for VECV stood at INR 5,671 crores, marking a substantial increase from INR 5,070 crores in the previous year.
5. Long-term Strategy: Management reiterated a focus on absolute profit and growth rather than percentage margins, with plans to optimize production and marketing expenditures in line with expanding volumes.

Overall, the management expressed confidence in sustaining growth through strategic marketing and product innovations, alongside addressing supply chain challenges.

Questions and Answers from Eicher Motors Q1 FY26 Earnings Call

Question 1: "My first question is just on capacity. So it looks like now we are heading towards sort of early to mid-80% capacity utilization on our operations as we sort of head into north of 1 million kind of territory in annual volumes. So just want to understand how you're thinking about capacity as you look to grow the business over the next three to five years?"

Answer: "Our capacity, as stated, is about 1.2 million with plants in Oragadam and Vallam, currently operating at nearly 90%. We're undertaking capex to enhance this capacity in modules, focusing more on new products rather than heavy expansions. We've cracked the code of modular capacity enhancement, which will guide our future growth."

Question 2: "My second question is just around the Hunter 350 refresh...are there any capacity constraints around the Hunter?"

Answer: "The new Hunter 350, launched in April, targets a youthful audience with improved features. While it's seeing strong inquiry levels, we're currently selling about 17,000-17,500 units per month. As we continue to leverage the HunterHood festival for marketing, we aim to build this brand further."

Question 3: "Do you see opportunities for margin to pick up as a result of cost takeout initiatives in the back half of the year?"

Answer: "We recognize the portfolio's emphasis on growth over margin, which we've strategically adopted. Value engineering initiatives are in place, but commodity inflation"”particularly in steel"”remains a challenge. We're focused on addressing costs while maintaining our affordability strategy."

Question 4: "Since we changed this strategy last year, have you seen any change in the profile of new buyers?"

Answer: "Yes, our demographics are shifting. The age profile for buyers of the Hunter is around 24-26. We aim to attract younger audiences through our marketing and product strategies, facilitating a greater connection to the Royal Enfield brand."

Question 5: "Can you provide insights into the volumes and customer profiles of Bullet, given its recent success?"

Answer: "In Q1, we sold about 50,000 units of the Bullet. This model appeals to an age group of 30-34 but is also drawing in younger customers, particularly with the Battalion Black variant. Customer feedback drove many product modifications that led to this success."

Question 6: "Any insights you could share about strong growth in international markets, especially Brazil?"

Answer: "In Brazil, we view considerable growth potential, facilitated by our CKD facilities and finance schemes. We've been gradually expanding our retail presence and brand-building strategies, indicating a bullish outlook for this market."

Question 7: "Currently, where does the ASEAN market stand for your exports, and how big can it grow?"

Answer: "We expect substantial acceptance in the ASEAN market, focusing strategically on key cities. We're cautious in expanding distributions, aiming for confidence in profitability. We'll enhance product relevance in those markets over time."

Question 8: "How has the acceptance of Classic 650 been, and what are Q1 volumes?"

Answer: "The Classic 650 is showing excellent traction, reflecting strong product acceptance. It's early to quantify volumes for Q1, but feedback is positive, indicating good market potential in both India and Europe."

Question 9: "What is your outlook for growth during the festive season given the soft market setup?"

Answer: "We remain optimistic for the festive season, expecting solid performance from new and refreshed models like the Hunter and Meteor. We're aligning product launches with auspicious times to drive sales momentum."

Question 10: "Can you walk us through the company's LNG and CNG project developments?"

Answer: "VECV is actively working on LNG and CNG projects. Our existing ICE and electric setups enable quick adaptations for LNG requirements by leveraging our current platforms, ensuring responsiveness to market needs."