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On Thursday, BofA Securities updated its outlook on Eicher Motors (NSE:EICH) (EIM:IN), increasing the price target to INR6,300 from INR6,000 while sustaining a Buy rating on the stock. The adjustment follows Eicher Motors’ latest financial results, which revealed a quarterly EBITDA of Rs12.6 billion, marking an 11% increase year-over-year but falling short of BofA’s projection of Rs13 billion and the consensus estimate of Rs12.8 billion. The shortfall was attributed to a margin miss, even though the company experienced positive volume sales and a 1.4% quarter-over-quarter rise in average selling price (ASP).
Eicher Motors, known for its Royal Enfield motorcycles, reported a 24% EBITDA margin for its bike business, which was considered weak as the company aims to balance growth and profitability. The analyst noted that Eicher Motors is actively refreshing and upgrading its product line in the fiscal year 2025 without significant price adjustments, alongside increased marketing expenditures. These strategies are part of the company’s efforts to expand its category and maintain growth momentum.
The quarter also included specific one-time expenses: a 20 basis point impact from inventory provisions for older bikes and a 40 basis point impact due to dealer liquidation in Europe, totaling Rs0.2 billion. Additionally, the company faced a 20 basis point commodity price pressure in the fourth quarter. However, a price increase of 1.15% implemented in April is expected to offset these pressures.
Looking forward, fiscal year 2025 is viewed as a reset year for Eicher Motors’ margins following its strategic pivot towards growth. The benefits from value engineering, scale advantages from common platforms, and pricing actions are anticipated to manifest within the next 12-18 months. The management’s commentary on the company’s growth trajectory was described as "fairly confident," indicating a positive outlook for the future.
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