- 11 декабрь 2018
The Royal Enfield motorcycle has always had an impactful presence on the Indian roads. And the equity shares of Eicher Motors, which makes the iconic machines, have dominated the automotive space in the past decade, outrunning massmarket bike-makers Bajaj Auto or Hero MotoCorp in wealth creation.
Eicher’s valuation premium over mass-market bike-makers stood at 35.7 per cent, compared with the five-year average of 75 per cent, data compiled from Bloomberg showed.
In the past three years, the valuation premium has been consistently falling, in line with Eicher’s moderating profit expectations. Eicher trades at 23.4 times based on the next 12-month earnings, while the average PE for mass bike-makers is 17.23.
To be sure, the market capitalisation of Eicher Motors is $9.2 billion: It is 33 per cent higher than that for Harley Davidson.
Royal Enfield volumes climbed 9 per cent between April and November, a period in which the bike-maker had to weather the floods in Kerala and industrial action at one of its factories.
Kerala makes up about 11 per cent of RE’s total volumes, while it lost around 28,000 units due to the strike. The company later cut its production guidance to 925,000 units for FY19, compared with 950,000 earlier.
The revised guidance suggests Eicher expects a 13 per cent YoY volume growth in the second half, while the consensus estimates point to 9-10 per cent growth. So, FY19 EPS estimates for Eicher have been reduced 7 per cent since the beginning of April 2018, while the projected earnings for mass-market bikemakers remain largely unchanged.