Eicher Motor trucks. (Photographer: Prashanth Vishwanathan/Bloomberg)

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.

The latter half of 2018 was a challenging period for the two-wheeler industry in India. Factors like increased insurance requirements, rising raw material costs and subsequent price increase due to regulatory safety requirements impacted the momentum of the industry.
Siddhartha Lal, Managing Director & Chief Executive Officer, Eicher Motors

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

Q3 Results: Eicher Motors Profit Meets Estimates; Margins Shrink