For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Eicher Motors Ltd (BOM:505200) reported its best-ever quarterly revenue of INR 4,263 crore, marking a growth of 3.6% over the previous year.
Royal Enfield achieved a significant milestone with its best-ever monthly sales performance, exceeding 100,000 units in October.
The company launched several new products, including the Guerrilla 450 and the Classic 650, which received positive market reception.
VECV recorded its highest-ever second-quarter sales of 20,774 units, despite a challenging market environment.
Eicher Motors Ltd (BOM:505200) is expanding its international presence with new facilities in Bangladesh and Brazil, indicating strong growth potential in these markets.
Negative Points
EBITDA margins slightly decreased to 25.5% from 26.4% in the previous year, indicating pressure on profitability.
The company faced increased other expenses due to new product launches and warehousing costs, impacting overall margins.
VECV's margins remain under pressure despite sales growth, with a decline in EBITDA margins from 7.8% to 7.1%.
There is a cautious approach towards inventory build-up in international markets due to upcoming regulatory changes, which may affect sales momentum.
The company is focusing more on growth rather than margin improvement, which could impact profitability in the short term.
Q & A Highlights
Q: Can you explain the factors behind the average selling price (ASP) changes for Royal Enfield this quarter? A: Vidhya Srinivasan, Chief Financial Officer: The ASP changes are primarily due to product mix variations, including a higher share of 450cc models. We haven't increased prices since last year, so the changes are largely mix-related.
Q: What were the launch-related costs for the Guerrilla 450, and how should we think about other expenses for Royal Enfield moving forward? A: Vidhya Srinivasan, Chief Financial Officer: Launch-related costs for the Guerrilla 450 and other new products are reflected in this quarter's expenses. We also incurred one-off warehouse costs. Next quarter will include some festive season marketing expenses.
Q: How did Royal Enfield achieve over 100,000 units in monthly sales during the festive season, and what is the outlook for the rest of the year? A: Balakrishnan Govindarajan, CEO of Royal Enfield: We introduced new products like the updated Classic and Bullet models, enhanced marketing efforts, and improved dealer inventory funding. These initiatives, along with strong consumer interest, drove sales. We expect continued demand post-festive season.
Q: Has there been any inventory buildup in international markets, and what is the strategy for managing inventory? A: Balakrishnan Govindarajan, CEO of Royal Enfield: Inventory changes are mainly on the domestic side. We are cautious about building inventory internationally, especially with upcoming regulatory changes. We focus on maintaining low inventory levels.
Q: What is the current status of the accessories, merchandise, and spare parts business? A: Vinod Aggarwal, Non-Executive Non-Independent Director: The business remains stable and is growing. Motorcycle accessories sales are closely tied to new motorcycle sales, and spare parts availability is a priority. We are also exploring retail strategies for apparel.
Q: How is the demand for Royal Enfield post-festive season, and will marketing efforts continue? A: Balakrishnan Govindarajan, CEO of Royal Enfield: Demand remains strong post-festive season, with increased inquiries and walk-ins. We will sustain marketing efforts to maintain momentum and support new product launches.
Q: What is the outlook for VECV's margins, given the current market conditions? A: Vinod Aggarwal, Non-Executive Non-Independent Director: We are focused on leveraging growth opportunities and expect the commercial vehicle industry to rebound in the second half of the fiscal year. We aim to improve margins through better leveraging of expenditures.
Q: How is the international business performing, and what are the growth prospects in key markets like Mexico and Turkey? A: Balakrishnan Govindarajan, CEO of Royal Enfield: We are seeing growth in international markets, with a 20% increase in retail sales. We are focusing on expanding in Mexico and Turkey, which have significant potential. Our strategy includes enhancing local presence and product offerings.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
