Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Eicher Motors Ltd (BOM:505200, Financial) achieved its highest ever quarterly revenue at INR4,393 crores, marking a growth of 10.2% over the previous year.
- The company reported its highest ever quarterly EBITDA at INR1,165 crores, up by 14.1% from the previous year.
- PAT increased by 20% to INR1,101 crores, including INR175 crores of EML share of profit from VECV.
- Royal Enfield's international market volumes grew by 26% over the previous year, with steady retail volume increases.
- VECV recorded its highest ever first quarter sales of 19,702 units, supported by resilient Indian economic growth and government infrastructure investments.
Negative Points
- Despite the overall growth, the middleweight motorcycle segment only saw a growth of 4% to 4.5%, indicating a slower pace compared to other segments.
- The domestic market for Royal Enfield faced dampened consumer sentiments due to extreme weather and general elections.
- VECV's EBITDA margin slightly decreased to 7.7% from 7.9% the previous year.
- The new Bullet model faced slower acceptance in some traditional markets, requiring product interventions.
- The company had to manage inventory carefully due to the transition to an auto replenishment model, impacting wholesale figures.
Q & A Highlights
Q: What explains the lack of growth in the premium motorcycle category despite new entrants and product actions?
A: Balakrishnan Govindarajan, CEO of Royal Enfield, explained that the two-wheeler industry, particularly the commuter segments, is catching up post-COVID. The middleweight motorcycle segment saw only a 4-4.5% growth over the first quarter of FY24. The market is currently experiencing a period of confusion due to numerous new entrants and product actions. However, Royal Enfield has maintained good retail performance and is optimistic about future growth as the market stabilizes.
Q: Are there plans to introduce the Guerrilla 450 to existing riding groups for experiential purposes?
A: Yes, Royal Enfield plans to engage its community by allowing them to experience the Guerrilla 450. The company aims to leverage its strong community connections to promote the new model and enhance customer engagement.
Q: What is the impact of the new tax regime on VECV's profitability?
A: Vinod Aggarwal, CEO of VECV, confirmed that the new tax regime at a 25% tax rate, down from 35%, will structurally improve VECV's profitability by approximately 10% YoY.
Q: How is Royal Enfield planning production capacity for the Guerrilla 450 and other models?
A: Balakrishnan Govindarajan stated that the overall capacity is modular and can be increased as needed. The company is currently clocking 8,000+ units for the K Sherpa platform and will ramp up production based on market demand.
Q: What is the outlook for export markets, and are they showing signs of recovery?
A: Balakrishnan Govindarajan noted that while international market sentiments are still not as expected, there are green shoots of recovery. Retail sales have increased, and the company is cautiously optimistic about future growth in international markets.
Q: What changes can we expect in the new 2024 Classic model?
A: The new Classic will feature exciting updates and collaborations. While specific details were not disclosed, the updates aim to strengthen the model's market position and appeal.
Q: How is the Hunter performing, and are there any plans for updates?
A: The Hunter has made a strong foothold among young, first-time motorcycle buyers. Royal Enfield plans to focus on brand building and market activation activities to further enhance its appeal. There will also be continuous product improvements and collaborations.
Q: What is the impact of the auto replenishment model on wholesales?
A: The shift to an auto replenishment model has impacted wholesales as the company aims to avoid inventory build-up and ensure the right product is available at the right location. This model helps maintain dealer profitability and optimize inventory levels.
Q: How are the new Himalayan and Guerrilla models performing in terms of sales?
A: The new Himalayan has seen good acceptance, with sales reaching 32,000 units in six months. The Guerrilla, which is just launched, is also showing strong initial traction and positive reviews.
Q: What is the outlook for the commercial vehicle industry and VECV's market share?
A: Vinod Aggarwal expressed optimism about the commercial vehicle industry's growth, driven by economic resilience and government infrastructure spending. VECV continues to expand its dealer network and product range, aiming to maintain and grow its market share.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
