The power of Eicher’s iconic Royal Enfield to keep profit engine running will be tested

BCCL
  • According to various analysts reports, Eicher is slated to see a 63% revenue dip and over 90% fall in its profit.
  • The commercial vehicle segment declined 84%, with no sales in April.
  • For the first time since its renaissance in 2008, Royal Enfield has witnessed a demand weakness, the management said.
A massive drop in the sales of Eicher Motors’ is all set to pinch the company’s first quarterly earnings on Thursday (August 13). The overall industry is already suffering from slowdown due to BS6 transition and a weak economy, “Covid-19 pandemic has further worsened the situation,” the management admitted during its last investor call

The company also does not expect any normalcy in sales numbers until the first half of this fiscal year.

The COVID-19 induced pessimism around public transport has also impacted sales of new buses, a segment that Eicher motors excel in. Adding to its woes, the lockdown forced labourers and drivers to return to their villages, weighing on the economy as well as impacting the supply chain and operations. And, that is already reflective in its last quarter sales number. The commercial vehicle segment declined 84%, with no sales in April.

Advertisement

SegmentQ1 FY20Growth %
VE Commercial Vehicles2100-84%

Eicher’s business was not immune to the slowdown either. Various analyst reports expect this to take a toll on its profit and revenue. The company is likely to see a 63% revenue dip and over 90% fall in its profit in its first-quarter earnings.

BrokerageExpected revenue growthExpected profit growth
Prabhudas Liladher68%89%
ICICI Direct66%97%
Nirmal Bang63%86%

For the first time since its renaissance in 2008, Royal Enfield has witnessed a demand weakness, the management said. Although they further added that the love for its premium bike Royal Enfield had brought back its customers in the market. But the lost sales in April have already dragged down the overall numbers.

Advertisement

SegmentQ1 FY20Growth %
Royal Enfield57,300-69%

“We believe new products would help expand the addressable markets and drive the next phase of growth for RE,” said Motilal Oswal report dated June 14. However, due to continuous market challenges, the company refrained from launching new products.

Despite the challenges, the share price has held its momentum, with some help from the stock split announcement. Since the beginning of the first quarter, the stock has jumped almost 65% to date.


Advertisement

SEE ALSO: Meet Kamala Harris, Joe Biden's pick for vice president
Central Vista project: 3 firms qualify for submission of financial bid for new Parliament building
{{}}