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Eicher Motors to witness swift recovery in sales in the second half the fiscal

Demand for Royal Enfield motorcycles was back at pre-covid levels in the fourth quarter and is expected to improve going forward on the back of new launches and expansion to international markets.Premium
Demand for Royal Enfield motorcycles was back at pre-covid levels in the fourth quarter and is expected to improve going forward on the back of new launches and expansion to international markets.

  • Eicher Motors on Thursday reported a 73% year-on-year jump in its net profit to Rs526 crore for the March quarter as demand for its middle-weight motorcycles recovered on the back of gradual improvement in economic output

NEW DELHI: Eicher Motors Ltd, manufacturer of premium motorcycles and commercial vehicles, is expected to report swift recovery in sales and overall operations after the second wave of the covid-19 infections abate, driven by new launches in the motorcycle business, ramp up of production, and a gradual recovery in commercial vehicle sales expected by the second half of the fiscal.

According to analysts of Motilal Oswal Institutional Equities, demand for Royal Enfield motorcycles was back at pre-covid levels in the fourth quarter and is expected to improve going forward on the back of new launches and expansion to international markets.

“After witnessing severe headwinds over the last 18 months, we expect volumes to grow hereafter. The company continues to expand its addressable market through distribution expansion (through smaller format stores), price laddering (by offering multiple 'trim' levels), new product launches (Meteor and more in the pipeline), and mass personalization through the ‘Make it Yours’ platform," analysts of Motilal Oswal Institutional Equities said in a note.

Eicher Motors on Thursday reported a 73% year-on-year jump in its net profit to Rs526 crore for the March quarter as demand for its middle-weight motorcycles recovered on the back of gradual improvement in economic output. Revenue from operations increased 33% y-o-y to Rs2,940 crore as a result of a 25% increase in sales of its motorcycles to 203,343 units.

Operating profit also jumped substantially to Rs634 crore compared from Rs47 crore in the corresponding period due to higher sales, prices increases and cost cutting measures.

Its commercial vehicle manufacturing venture, Volvo Eicher Commercial Vehicle Ltd (VECV ), also reported a net profit of Rs127 crore compared to a loss of Rs27 crore as sales of heavy and medium commercial vehicle showed signs of recovery. Revenue for the quarter rose 71.4% to Rs3,602 crore.

According to analysts of ICICI Securities, Eicher Motors is likely to witness a growth tailwind in FY22 and FY23 as both underlying market rebound, and new product launches stimulate demand. However, higher input costs and new platform costs stabilization could hinder pace of margin recovery.

“We believe, in the near term covid is likely to dampen demand, however, new product success coupled with improved customer life-cycle experience are likely drivers for potentially a strong rebound in second half. Valuations remain fair," they added.

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