Q2 Results: Eicher Motors’ Profit Beats Estimates On One-Time Tax Gain, Higher Other Income
Eicher Motor’s net profit increased 4.4 percent year-on-year to Rs 572 crore in the July-September period.
Eicher Motors Ltd.’s quarterly profit surpassed estimates driven by a one-time tax gain and a jump in other income.
Net profit increased 4.4 percent year-on-year to Rs 572 crore in the quarter ended September, the maker of Royal Enfield motorcycles said in an exchange filing. That’s higher than the Rs 459-crore consensus estimate of analysts tracked by Bloomberg.
The profit was aided by a lower tax expense as the company switched to the new corporate tax rate cut announced by Finance Minister Nirmala Sitharaman on Sept. 20. A deferred tax gain of Rs 54 crore and 54 percent higher other income at Rs 145 crore helped the bottomline.
Revenue of the automaker maker fell 9 percent to Rs 2,192.5 crore—matching with the Rs 2,160-crore estimate.
That comes after the company sold 1,66,589 units of Royal Enfield motorcycles between July and September, a fall of 20.7 percent a year ago. Besides, the sales of Eicher Motors’ subsidiary— VE Commercial Vehicles—declined 39 percent year-on-year to 11,370 units during the three-month period.
“The commercial vehicle industry continues to be challenging due to weak industry sentiments. Volvo Eicher gained market share in second quarter despite a decline in total industry volume,” Managing Director Siddhartha Lal said in a statement.
The automobile sector is currently is facing its worst slowdown in over two decades as Indians cut consumption in a slowing economy. That has triggered job losses at both automakers and showrooms to cut costs while passenger vehicle sales dropped for the 11th straight month in September.
Eicher Motors’ operating profit fell 25.8 percent over the previous year to Rs 541.4 crore. Analysts had estimated Ebitda at Rs 545 crore. The operating margin contracted to 24.7 percent from 30.3 percent—analysts had forecast 25.2 percent.
The contraction in operating performance can be attributed to lower volumes, according to the management.
That being said, the company is focusing on exports in markets where it has seen better growth. It is also growing its sales network and has added nearly 500 studio stores, Lal said later at a press conference.
Have seen green shoots in the market place for Royal Enfield.Siddhartha Lal, MD, Eicher Motors
Shares of Eicher Motors rose as much as 2.5 percent, the most since Oct. 29, after the earnings announcement.