Eicher Motors to witness gradual recovery in the second half of FY21: Brokerages2 min read . Updated: 16 Jun 2020, 12:14 AM IST
- Eicher Motors on Friday reported a 44.22% year-on-year decrease in net profit to ₹304 crore, for the quarter ending March 31
- The company also experienced decline in sales during the first two months of the quarter as result of the economic slowdown
Notwithstanding the adverse impact of the Covid -19 pandemic on demand for premium consumer products, Eicher Motors Ltd – manufacturers of Royal Enfield brand of premium motorcycles - is likely witness gradual recovery in demand from the second half of the current fiscal year due to its strong brand equity and upcoming product launches, analysts said.
“With a healthy response received for the new 650cc Twins, Interceptor GT, and Continental GT (both in the Indian as well as international markets) and some recovery seen in domestic sales, we expect RE volumes to recover from 2HFY21 after declining up to 1HFY21. The upcoming new product launches on the brand-new platform would not only expand the product portfolio and narrow the gap in product quality vis-à-vis 650cc Twins, but it would substantially expand the addressable market in India and globally," said said Jinesh Gandhi and Vipul Agrawal of Motilal Oswal Institutional Equities.
Eicher Motors on Friday reported a 44.22% year-on-year decrease in net profit to ₹304 crore, for the quarter ending March 31, as a result of a significant decline in retail sales in March, due to the adverse impact of the Covid -19 pandemic and the subsequent lockdown measures imposed the by the centre and states to contain the spread of the virus.
The net profit of the company during the corresponding quarter stood at ₹545 crore.
The company also experienced decline in sales during the first two months of the quarter as result of the economic slowdown. Net sales during the period decreased by 11.68% year on year to 2208 crore as a consequence of 17% decrease in vehicle sales during the period to 163083 units.
“In the near term, discretionary demand is expected to remain weak as customers could tighten their purse strings. However, Royal Enfield’s strong brand equity and new products launches could help it limit the impact of this headwind. Over the medium to long term, we believe, the premiumisation theme will play out in two-wheelers," said Nishant Vass and Pratit Vajani, research analysts, ICICI securities.
In an indication of a slight improvement in demand for premium products, bookings for Royal Enfield’s motorcycles have almost touched the pre – Covid-19 pandemic levels in May and first week of June, after the centre and the states decided to ease the lockdown measures, said Siddhartha Lal, managing director, Eicher Motors in a post-earnings conference call on Friday.