Home >Markets >Stock Markets >Eicher Motors falls 3% on weak March quarter performance

MUMBAI: Shares of Eicher Motors Ltd, the maker of Royal Enfield and Classic motorcycles, fell more than 3% on Monday after the company reported a drop of 44.15% year-on-year (YoY) in consolidated net profit for the March quarter.

The company posted a net profit of 304.28 crore for Q4FY20, against 544.84 crore in the same period last year.

The stock of Eicher Motors ended at Rs16,484.20, down 2.24% from the previous close, while the Sensex fell 1.77% to 33183.38.

The company's total income, which includes other income, declined to 2,351.30 crore during the quarter under review. The company had reported a total income of 2,642.78 crore in the corresponding quarter last year.

“This has been a tough year overall for the industry. The last quarter brought with it unprecedented challenges and disruptive changes. At Eicher Motors, we have witnessed the impact of this situation, but have chosen to focus on the opportunities within these problems," said Siddhartha Lal, managing director (MD) of Eicher Motors.

Analysts at Nirmal Bang Securities said in a result note, "Royal Enfield has over 600 studio stores in tier-2 and 3 towns and plans to expand it further. Studio stores have low cost operating model and have lower breakeven point."

"Expected recovery in the rural economy will support demand from studio stores and will boost the spares and services revenue as well. The company is also focusing on improving accessibility by way of strip down variants, new colour options and has a long new launch pipeline, thereby, giving customers more choices and expect volume, revenue and PAT (profit after tax) to grow at a CAGR (compound annual growth rate) of 5.1%, 13.6% and 15.8%, respectively, over FY2020-2022E," Nirmal Bang added.

The brokerage firm has a buy rating on the stock.

Royal Enfield sold 163,083 motorcycles in the March quarter, a decline of 17% from 197,567 units sold in the same period in FY19.

The company in a press release said, "Last quarter of this fiscal was particularly challenging in the wake of the unprecedented coronavirus pandemic. Royal Enfield’s manufacturing and retail operations were suspended between March 23 and May 5 as per the government directives. The company has since resumed operations, and more than 90% of its retail network is now operational."

Analysts at Motilal Oswal said in a note to clients said, " With satisfactory order flow of bookings and 90% of dealers are now operational, manufacturing operations are improving slowly, the company is seeing a sharp pickup in online inquiries and fulfillments."

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