Eicher Motors in driver's seat

Eicher Motors accelerated on Wednesday as Q3 net profit surged a huge 78.5%, way beyond market expectations.

The scrip of the light commercial vehicles maker jumped 3% to Rs 83.50 on BSE in late trading. It, however, came off the day's high of Rs 85.40. Around 10,600 Eicher Motors were exchanged on BSE so far.

The stock was boosted by impressive Q3 results unveiled after trading hours Tuesday. For Q3 ended 31 December 2002, EML posted a 78.5% leap in net profit to Rs 10.48 crore (Rs 5.87 crore). The Q3 net profit was much higher than market expectations of Rs 9.5 crore.

Volume growth and the rise in operating profit margin due to stringent cost control boosted EML's Q3 results. Gross sales rose 32% to Rs 172 crore in the latest Q3 from Rs 131 crore in Q3 ended 31 December 2001.

There was a 33.3% increase in sales volume to 3,211 units. The reduction in debt from strong cash flows helped EML record net interest income in the quarter.

"Considering the strong Q3 results we plan to upgrade our FY 2002-03 PAT expectations sharply by around 20% from the current Rs 29.97 crore. At the current market price of Rs 82, the scrip awaits for ramp-up in MCV volumes. Taking into account the initial feedback from transport operators, we feel its only a matter of time that the volumes will start rolling in. With financials improving every quarter, we reiterate buy on the stock," auto analysts from a local brokerge wrote in a report on EML's Q3 results.

EML is known for superior vehicles with higher fuel efficiency and lower maintenance costs. The company's recently launched 16-tonne vehicle has received a good response.

EML was incorporated in 1982 and introduced its first product, the Canter, a 6-tonne GVW truck manufactured at its state-of-the-art plant at Pithampur, Indore, in collaboration with Mitsubishi Motors Corporation, Japan, in 1986. From a single 6-tonne GVW truck in 1986, the company's range today extends from 5-t to 16-t GVW trucks and the Skyline and Voila range of buses. All its products can be offered in BS II compatible options. It also has one of the best CNG technologies in the world in its CNG buses.

From a market share of 11.5% in FY 1999-2000, EML's share improved to 17.5% in FY 2001-02. This is when industry sales fell 8.6% during the period. The company's domestic sales increased at a CAGR of 13.5% and exports surged at a CAGR of 55%.

Meanwhile, EML has recently bid for acquiring control over Punjab Tractors. The Punjab state government proposes to divest its stake in Punjab Tractors.