• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

S. Muralidhar

Mr Rakesh Kalra, Chief Executive, Eicher Motors

SHAREHOLDERS of Eicher Motors can continue to the hold on to the stock at the current levels of Rs 150. At this price, the stock trades at a price-to-earnings (P/E) of about eight times (taking its 2002-03 earnings per share).

The only direct comparison for Eicher is Swaraj Mazda — exclusively involved in the manufacture of commercial vehicles — which trades at a price-earnings of 12.4 times.

Considering the new product roll-out strategy of the company and the growth potential of the commercial vehicles industry, Eicher shareholders can hold on to the stock for potential medium-term gains.

The commercial vehicles segment of the automobile industry was on an upswing during the past five to six quarters.

Domestic sales of commercial vehicles (CVs) grew a robust 26 per cent during the quarter-ended June 2003 and the exports of these vehicles posted a decent 10 per cent growth rate.

Eicher Motors has ridden this growth wave in the CV industry during the last fiscal and continues to post healthy growth this year too. The company's foray into the medium and heavy commercial vehicles segment and the subsequent roll-outs have started producing better results this fiscal. For the quarter ended June 2003, Eicher Motors reported a massive 65 per cent jump in sales in the medium and heavy vehicles category, with the goods carrier segment contributing the maximum.

The company's passenger carrier sales in this segment (mostly buses for private operators) were not available in the market last year. Eicher's light commercial vehicles sales have been stagnating at previous period levels, during the first four months of this fiscal.

For the first quarter of this fiscal, Eicher Motors reported gross sales of Rs 173.8 crore, up over 28.5 per cent compared to the corresponding previous period. After a higher excise duty outgo of Rs 23.9 crore, net sales worked out to Rs 149.9 crore compared to Rs 122.2 crore in the first quarter of the previous fiscal.

Also, during the quarter under review, Eicher Motors' components and raw material costs seem to have risen. The consumption of raw materials, components and cost-finished goods purchased for resale worked out to 81.7 per cent compared to the 78.8 per cent recorded during the quarter ended June 2002. Staff costs, another important cost factor for the company, shot up by over 35 per cent to Rs 6.2 crore, partly due to the increased staffing requirements post entry into the medium and heavy CV segment.

The company's operating profits grew by about 16.8 per cent to Rs 13.8 crore for the first quarter of this fiscal. Higher provisioning for depreciation and tax, however, pulled down Eicher Motors' net profit growth to about 11.5 per cent at Rs 6.1 crore compared to the net profit of about Rs 5.4 crore recorded during the corresponding previous period.

The earnings per share of the company works out to Rs 3.04 for the quarter under review compared to Rs 2.69 during the first quarter of 2002-03.

Eicher Motors, incorporated in 1982, has grown in terms of product range from a single 6-tonne GVW (gross vehicle weight) truck in 1986, to one that extends from 5-tonne to 16-tonne GVW trucks and the Skyline and Voila range of Buses.

All its products can be offered in Bharat Stage II (emission standard) compatible options. In the domestic market, the company holds a 29 per cent market share in the 6-tonne to 11-tonne GVW segments.

Article E-Mail :: Comment :: Syndication

Stories in this Section
A guide to fixed income investing

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line