Royal Enfield Sales Propel Eicher Motors’ Profit In January-March Quarter
Eicher motors’ profit growth was the slowest in four years.
Eicher Motors Ltd.’s profit rose in the January-March quarter as sales of its motorcycle arm Royal Enfield continued to grow. Yet, this was the slowest profit growth for the company in the last four years.
Profit in the March-ended quarter of the financial year 2016-17 increased 34 percent to Rs 459 crore as compared to the same quarter last year, according to a stock exchange filing. Revenue rose 23.3 percent to Rs 2,132.5 crore. Both the topline and bottomline beat the consensus of analyst estimates tracked by Bloomberg.
The Royal Enfield brand had reported strong sales in the fourth quarter, in a departure from the prolonged slowdown in India's motorcycle sales on account of demonetisation. Eicher's sales rose 21 percent in the fourth quarter as compared to the same quarter last year.
Eicher plans to invest Rs 800 crore in the Royal Enfield brand over the next financial year, it said in a separate media statement, which will be used to set up a new manufacturing facility in Chennai, and to establish product development and technical centres in U.K. and India. Eicher's third manufacturing facility, which is expected to be operational by August, will increase Royal Enfield's production capacity to 8.25 lakh units in financial year 2018.
Royal Enfield had rolled out its adventure touring motorcycle 'Himalayan' in India at the end of March year. It now wants to add to its adventure touring line-up after positive response for Himalayan, chief executive officer Siddhartha Lal said in the statement.
The Himalayan has been well received in India and with it, we are creating a full new segment in the country.Siddhartha Lal, CEO, Eicher Motors
Eicher's operating profit went up 31 percent to Rs 585 crore, while its operating margin expanded 150 basis points to 27.4 percent.
"Our immediate business outlook remains strong and Royal Enfield continues to grow consistently, competitivelty and profitably," Lal added in the statement.
The board has recommended dividend of Rs 100 per share, taking the total dividend payout this year to Rs 272 crore.
Joint Venture Sales Grow
Total sales of Volvo-Eicher Commercial Vehicles (VECV) Ltd. grew 11.5 percent year-on-year to 17,341 units during the quarter. While exports grew 13.8 percent to 1,882 units year-on-year, sales of Volvo Trucks grew 53.4 percent to 425 units.
Despite headwinds like demonetisation, rising fuel costs and the transition towards Bharat Stage-IV emission norm compliant vehicles, the joint venture with Volvo has outperformed the industry, Lal said in the statement. The company will invest Rs 450 crore in the VECV business during FY18, he added.
The advent of the new Goods and Service Tax regime will provide further impetus to sales and VECV will be able to grow its market share further in the coming months.Siddhartha Lal, MD & CEO, Eicher Motors
Shares ended the trading day little changed at Rs 25,819.90 on the National Stock Exchange. The stock has outperformed the S&P BSE Sensex index, with gains of 18.7 percent in 2017, compared to a 12.1 percent rise in the benchmark index.