Q1 Results: Eicher Motors’ Profit Misses Estimates; Margin Contracts

Eicher Motors Ltd.’s profit fell in the quarter ended June as margin contracted amid the worst auto slowdown in a decade.

Net profit declined 21.6 percent year-on-year to Rs 451.8 crore in the April-June period, the maker of Royal Enfield motorcycles said in an exchange filing. That missed the Rs 490-crore consensus estimate of analysts tracked by Bloomberg.

Revenue of the two-wheeler maker, too, fell 6.5 percent to Rs 2,381.9 crore—in line with the Rs 2,386-crore estimate.

Its operating profit declined 24.1 percent over last year to Rs 614.5 crore. Analysts had estimated Ebitda at Rs 648 crore. The operating margin contracted 600 basis points to 25.8 percent. That’s because employee costs rose 24.6 percent year-on-year to Rs 211.60 crore.

Edelweiss Financial Services, in a research report prior to the earnings, said increase in costs will impact margin in the near term but it’s expected to “normalise” over the next two-three years.

“The two-wheeler and the commercial vehicle industry continue to face headwinds on account of weak consumer demand, the company’s Managing Director Siddhartha Lal said. “In the CV industry, sales have been low due to the weak demand on account of economic slowdown and liquidity and it is also witnessing heavy discounting.” He added that their preparedness for the BS-VI transition was on track and is on course to meet regulatory timelines.

Eicher Motors’ total sales dropped 19 percent over the last year to 1.82 lakh units in the first quarter, according to company’s disclosures.

Sales of Indian automakers have been falling since the Diwali festival last year. The slump has forced companies to lay off contract workers and dealers to shut showrooms across the country.

Shares of Eicher Motors ended 1.78 percent higher before the earnings announcement. That compares with a 0.3 percent gain in the benchmark Nifty 50 Index.