Eicher Motors' order book has been growing for its motorcycle segment. The company has over 95 percent market share for above 250cc motorcycle space.
Calendar year 2014 has been a dream year for the company, says Siddhartha Lal, MD and CEO, Eicher Motors . The company has grown six-fold in last five years. The brokerages are upgrading the stock of the company after stellar performance last quarter. The stock has doubled this year and hit record high of Rs 12,372 on September 16, 2014.
Macquarie sees a 4x rise in earnings on the back of Royal Enfield business growth this quarter. The Royal Enfield sales were up 85 percent year-on-year to 74000 units. The company reported EBIT growth of 67 percent aided by motorcycle business.
Reports suggest Eicher aims to dominate the mid-sized motorcycle market in the US, which is currently dominated by Harley Davidson. The US is USD 7 billion motorcycle market, if Eicher cracks it, margins could be much higher.
Speaking to CNBC-TV18, Lal says the order book of the company has been growing for its motorcycle segment. Eicher Motors have over 95 percent market share for above 250cc motorcycle space.
According to management, the company has a lot of room to grow and is creating ground for mid-size motorcycle segment globally. The company is looking for a 70-75 percent capacity expansion going ahead.
Below is verbatim transcript of the interview:
Q: It's been a spectacular year for you so far but what will the next year look like in terms of next 6-12 months and how much can you seek out in terms of gains in the Royal Enfield business?
A: It has been a great year for us but it's been a long while in coming. It has not happened just this year. It's been a lot of work that we have put in on the motorcycle business that we are talking about, which is to evolve the market into a leisure motorcycle market – that has been a over decade long process.
The results that we are seeing in the last two-three years, where the sales have shot up and in the last five years we have grown six fold now.
It has been a spectacular growth story for us but it has been a hell lot of work as well to put up capacities to make sure that on the ground we are able to have that many dealer points, service points. So, there are a lot of growing pains. It's good pains but there is a lot of that going on right now.
As we see things moving forward, we have a good order book as well and so, we are in a very fortunate situation today where we have an order book for motorcycles. We take advance from customers.
We deliver then in three-five months. So, we have a healthy order book which is continuing to grow very well over the last many months and we expect that to continue to grow. So yes, things are looking good on the Royal Enfield motorcycle side.
Eicher Motors stock price
On October 16, 2014, at 11:09 hrs Eicher Motors was quoting at Rs 11280.00, up Rs 71.15, or 0.63 percent. The 52-week high of the share was Rs 12372.50 and the 52-week low was Rs 3752.00.
The company's trailing 12-month (TTM) EPS was at Rs 158.68 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 71.09. The latest book value of the company is Rs 303.07 per share. At current value, the price-to-book value of the company is 37.22.
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