Q3 Results: Eicher Motors Profit Meets Estimates; Margins Shrink

Eicher Motors Ltd.’s profit rose marginally for the December-ended quarter, matching analyst estimates, even as sales of its flagship Royal Enfield motorcycles declined.

The company’s net profit rose 2.4 percent year-on-year to Rs 533 crore, according to its exchange filing. That compares with Rs 524-crore consensus estimate of analysts tracked by Bloomberg.

Revenue of the maker of Royal Enfield motorcycles rose 3.2 percent year-on-year to Rs 2,341.1 crore. That was in line with the analysts’ estimate of Rs 2,266 crore. Earnings before interest, tax, depreciation and amortisation declined 4 percent Rs 679.5 crore, while operating margin contracted 220 basis points to 29 percent.

“The lower-than-expected margin is a concern,” said Naveen Kumar Dubey, equity research analyst at Narnolia Securities. “There were new launches that had an impact on other expenses which resulted in lower margin.”

Royal Enfield motorbikes suffered a 10 percent decline in volumes in November-December period, despite absence of negative factors such as production losses due to labour strikes, according to a report by Emkay Research that was released ahead of the earnings. Competition in the premium motorcycle segment has increased with the launch of Mahindra & Mahindra-backed Jawa Motorcycles, the report said.

Employees of the Royal Enfield plant at Oragadam, on the outskirts of Chennai, went on a near-three-month strike, which ended on Nov. 13, the company had said in a filing.

Shares of the company fell as much as 2.5 percent to Rs 20,331 apiece after the earnings announcement.