Eicher Motors – Prancing Around

creating emotional attachment and rabid obsession with the royal enfield

WB said own a brand and you own a piece of the consumers mind. Eicher has gone beyond that and has created, maintained and promises to explode a CULT in the Indian Motorcycling Enthusiasts. Taking advantage of heritage and purely fuelling testosterone  these bikes have become symbols of masculinity and a free soul.  From being conversation starters to living the biker life RE has simply nailed it, while being insanely profitable too. Giving out hints of Apple ? Totally !

The company came out with its Annual Numbers today and they were astronomical.

In 2010 the company sold 52,000 infields, fast forward to 2013 they sold 1,80,000 and hope to sell 2,80,000 in 2014, with an average price of 1.1 lakh, that a turnover of 3,080 cr from just RE, and with 20% margins that will be a 20% hike in PAT over 2013. Before you start compounding the sales figures every year and get excited. There is more to the story than just that.

Sales numbers

Currently RE sells, the Bullet,  Electra, Classic, Thunderbird and the Continental GT. With plans to launch another three motorcycles in the 300-550cc range, with an assumption of retro styling RE will have the segment more than covered for a few years to come.

If RE can keep up its image in the future, the stock will provide multi baggers for investors.

On the other hand, the CV segment is bleeding and has been doing so for the last 2 years. While Eicher is being dragged into the discount game by TATA an Ashok Leyland, Eicher is trying to play Bajaj and only do business where it is profitable. However, this “I can bleed you out” atitude is set to change with the elections and business resuming its normal gait. When it does Eicher will be in the sweet spot as it is ready with the new brand of GO Pro trucks, which are truly aspirational trucks.

I visited the AUTO EXPO 2014 and while it was normal to see people posing in front of sexy cars and bikes, there were a whole bunch of excited people posing in front of Eicher Trucks ! I couldn’t believe it. Since when did trucks become cool ? Apparently, after Eicher launched the Go Pro series. Eicher will introduce 75% of these trucks into the market by Feb 2015 and the entire range by August 2015. Just in time if the elections do not end up in a coalition government.

The CV business today is more profitable and has better technology than any other plant in the country and might even qualify amongst the best CV plants in the world. Whats more surprising is that Geely Enterprises the owners of Volvo, though from China want India as the manufacturing base, even when companies like JLR are moving manufacturing to China.

While R&D and CAPEX continues to be big on the companies expenses R&D spend helps bring the tax rate down to 19%. Depriciation too will be eating away a large amount of profits as Eicher spends 2500 cr on the CV segment and other 600cr on the RE next year.

The JV with Polaris is still a mystery, but it looks like the duo will be releasing a quadracycle which again will be a newly created segment much like the mid-size bike and the Go Pro trucks.

With RE catapulting, the CV business seemingly near the end of the depression and a surprise from Ploaris, Eicher seems to have all the triggers pointing in the right direction.

BUY.

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