Chip shortages, as anticipated, impacted the September quarter earnings performance of Eicher Motors Ltd. However, improved realizations of Royal Enfield and lower staff expenses led to a strong show by the firm. Net profits at ₹373 crore was up 8.7% year-on year (y-o-y) from the year-ago period, buttressed by a 5.4% growth in total revenues. Its flagship Royal Enfield also showed resilience and the performance of the commercial vehicles segment was also decent.
Royal Enfield sales stood at 123,515 units during the quarter, a decline of 17.2% y-o-y. However, price hikes and higher exports pushed up Royal Enfield realizations, helping it report the best ever performance in international markets for the second successive quarter. Exports at 17,922 units were up 132% over Q2FY21 and 41% over Q2FY20, said the company.
Royal Enfield realizations grew 25% y-o-y and 15% sequentially to ₹176,700, higher than estimates, analysts noted. Better realizations also partly offset the impact of lower volumes due to semiconductor shortages. Analysts expect Royal Enfield sales to improve, and this has kept Eicher’s outlook upbeat. Commercial vehicles sales have risen following a pick-up in economic activity. VE Commercial Vehicles Ltd’s sales volume nearly doubled to 15,134 units during Q2.
Sales have got a boost amid the ongoing festival season. Consumer sentiment has improved and the second half is likely to be better than the first half. Notwithstanding the chip shortage, the management is optimistic about growth. “Near-term uncertainties because of supply chain issues notwithstanding, the recently launched Classic 350 and upcoming products would help expand addressable markets and drive the next phase of growth for RE," analysts at Motilal Oswal Financial Services Ltd wrote in a note.
