Eicher Motors share price has delivered strong returns for its investors in last ten years. Eicher Motors stock which stood at Rs 594.7 on December 2, 2009 rose to Rs 21,727 on December 2, 2019 translating into rise of 3,553% on BSE. An investment of Rs 1 lakh in this stock in 2009 would now be over Rs 36.53 lakh. Of late, the company which owns manufacturer of Bullet motorcyle Royal Enfield, has been witnessing fall in demand due to the slowdown in the auto sector which has lasted for over an year now.
On Monday, Eicher Motors reported a 8 per cent fall in total two-wheeler sales at 60,411 units against 65,744 units in November last year. Its total VECV (JV between Volvo Group and Eicher Motors) sales for November declined 23.9 percent at 3,594 units against 4,720 units. Share price of Eicher Motors closed 5.29% or 1,211 points lower at Rs 21,679 on same day.
The stock has been losing for last one year on fall in demand led by a slowdown in Indian economy. Subsequently, it fell to a fresh 52-week low of Rs 15,196 on August 26, 2018.
However, the sinking Eicher Motors share got a push on September 20 this year when FM Nirmala Sitharaman announced cut in corporate tax rate to 22% from 30% on September 20.
The stock which closed at Rs 15,759 on September 19 rose 13.33% to end at Rs 17,860 on September 20.
Since then, the large cap stock has gained 45.25% to Rs 22,890 in nearly 3.5 months. 14 of 41 brokerages rate the stock "buy" or 'outperform', 11 "hold", nine "underperform" and seven "sell", according to analysts' recommendations tracked by Reuters.
Comparison with peers
Eicher Motors is the parent company of Royal Enfield, which manufactures premium motorcycle Enfield Bullet. The firm has listed competitors such as Bajaj Auto, Hero MotoCorp , TVS Motor and Tata Motors. The stock has outperformed its peers in terms of returns during the last ten years. While Bajaj Auto has gained 272.59% in last 10 years, Tata Motors share price has risen merely 11.49% during the period.
Hero MotoCorp and TVS Motor have gained 40% and 1,489%, respectively during the same period.
Eicher Motors has a price to earnings (PE) ratio of 28.92 compared to the industry PE of 21.60, which signals that the stock is overvalued. It also indicates investors are expecting higher earnings growth in the future in comparison to the sector.
On the other hand, its peers Bajaj Auto, Hero MotoCorp , TVS Motor and Tata Motors have PE ratios of 17.70, 13.06 , 29.90 and -69.73% respectively.PE ratio is calculated by dividing the market price of a share by earnings per share. If a stock has PE ratio of 25, it means one needs to invest Rs 25 in the share to earn Rs 1.
Strong financial performance
The company reported a 21% fall in its Q1 profit to Rs 451.8 crore on subdued demand and low volume.
Eicher Motors' total revenue from operations fell 7% to Rs 2,382 crore in Q1 compared to Rs 2,548 crore in Q1 of FY 2018-19. Earnings before interest, tax depreciation and amortisation stood at Rs. 614 crore, lower by 24% compared to Rs 810 crore in Q1 of FY 2018-19.
It improved its performance in second quarter of current fiscal. Eicher Motors posted a 4.36 per cent increase in its consolidated net profit at Rs 572.69 crore for the second quarter ended September 30, 2019 against Rs 548.76 crore in the July-September period of 2018-19. Total revenue from operations, however, declined to Rs 2,192.47 crore in the second quarter as compared with Rs 2,408.17 crore in the same period of the previous fiscal.
During the period of 10 years, the firm has shown significant improvement in its financial performance. For fiscal ended March 2019, the firm logged Rs 9,794.06 crore in income from operations compared to Rs 4421.26 crore for fiscal ended December 2010.
Net profit rose nearly six times during the period. For fiscal ended March 2019, the firm logged Rs 1,961.85 crore in net profit compared to Rs 306.85 crore for fiscal ended December 2010.
Earnings per share rose more than 11 times to Rs 807.76 per share for the fiscal ended March 2019 compared to Rs 70.54 for the fiscal ended December 2010.