Eicher Motors faces margin squeeze even as high realisation drives Q3 profit

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₹177,758 a unit, registering nearly 10% growth. Softer raw material costs supported operating profitability, with Eicher’s Ebitda increasing by 27% to ₹1,090 crore in Q3. Exports volumes (6.4% of the total in Q3) were a big drag, falling 24% year-on-year, while domestic volumes were up 5.6%.

Exports were beaten down largely because of a substantial slowdown in Europe amid weak macro factors. Despite exports falling, Royal Enfield sustained its market share in relevant categories in key geographies. Although management expects export volumes to rebound, this may take two to three quarters.

Apart from a potential economic recovery, the recently launched 650 Shotgun motorcycle (for the export market) should also drive volumes. Domestically, there has been a 15-16% uptick in enquiries and an 11% increase in bookings for Royal Enfield products. The commercial vehicle business, a joint venture with Volvo, achieved remarkable 14% volume growth, supported by strong market-share gains across product categories.

While management foresees a temporary slowdown in the CV business due to the upcoming Lok Sabha elections, they remain optimistic about sustained robust demand over the long term, driven by infrastructure development and replacement demand from the phasing out of older BS-III and BS-IV trucks. Analysts at Yes Securities expect Royal Enfield’s overall volumes to grow at about 8% CAGR over FY24-26E (versus -7% CAGR over FY20-22) despite competitive launches. “Recent launches could be an inflection point for Royal Enfield as a completely new and improved platform should drive efficiencies.