Eicher Motors Q1 revenue up 27% as raw material costs squeeze margins
Eicher Motors posted a 27% jump in first-quarter revenue on strong domestic motorcycle demand, but rising input costs and an elevated valuation are dividing analysts on the stock's near-term outlook.
Eicher Motors reported a 27% year-on-year increase in standalone revenue to ₹6,214 crore for the June quarter. This was driven by a 24% rise in Royal Enfield motorcycle volumes to 3,30,427 units.
Despite price hikes, Ebitda grew at a slower 23% to ₹1,510 crore due to rising raw material costs. Ebitda per unit slipped 1.4% to ₹45,700, even as average realisation per unit edged up 1.7% to ₹1.88 lakh.
Domestic volumes surged 32%, offsetting a 20% decline in exports, which account for roughly a tenth of total sales. Management attributed the drop in overseas shipments to the West Asia conflict and supply-chain disruptions in Europe.
During the quarter, the company launched the Guerrilla 450 Apex in Australia and New Zealand, alongside the Goan Classic 350 in Nepal and Malaysia. Management expects export volumes to recover as the geopolitical situation stabilises.
The commercial vehicle joint venture, VECV, saw volumes rise 15% to 24,815 units on government infrastructure spending. However, its Ebitda grew just 6% to ₹541 crore, hit by a significantly higher raw-material-cost-to-sales ratio of 74% compared to 59% for the motorcycle unit.
Management is positioning for long-term growth, recently beginning India deliveries of its first electric motorcycle, the Flying Flea. To meet anticipated demand, the board approved a new 0.45 million unit greenfield plant in Andhra Pradesh, targeted for completion by FY30.
Combined with an ongoing brownfield expansion in Tamil Nadu, total capacity will reach 2 million units by Q2FY28, up from 1.5 million currently. Management noted that enquiries and bookings are currently running ahead of wholesale volumes.
The stock has rallied 44% over the past year and currently trades at 29 times one-year forward earnings. Analysts remain divided on whether this premium is justified. ICICI Securities projects 14% volume growth and 20% earnings per share growth through FY29.
Conversely, JM Financial Institutional Securities warned that elevated raw material prices, aggressively priced new models, and brand activation costs will continue to weigh on profitability. The brokerage also flagged upcoming capacity ramp-up expenses, suggesting the recent sharp rally limits near-term upside.
