The share price of Eicher Motors fell nearly 10 percent on Friday after the company reported a weak set of June-quarter results. The stock fell as much as 10 percent to Rs 19,505.70 per share on the NSE.

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The Royal Enfield manufacturer reported a consolidated loss of Rs 55.2 crore for the quarter ended June 2020 as compared to last year's profit of Rs 451.8 crore.

Consolidated revenue fell significantly by 65.6 percent YoY to Rs 818.2 crore in the quarter on the back of declining volumes. However, the international business of the company has been doing well due to the sale of 650 twin motorcycles and Himalayan, said Managing Director Siddhartha Lal.

Consolidated earnings before interest, tax, depreciation, and amortization (EBITDA) plunged 99.4 percent YoY to Rs 3.8 crore, with the margin is down to 0.5 percent in Q1FY21 as compared to 25.8 percent in Q1FY20.

Sale of motorcycles also declined significantly, by 68 percent YoY to 58,383 units as against 1,81,996 units for the same quarter last year.

"The previous quarter put forth unprecedented challenges for the industry and for Eicher Motors. However, we believe that the long term potential for both Royal Enfield and VECV is very promising. Towards the end of the quarter, we have witnessed encouraging consumer sentiment which was evident in our sales for the month of June. We believe that this trend will continue into this (Q2FY21 ) quarter as well," added Lal.

Following earnings, CLSA downgraded the stock to 'sell' from 'underperform', with target price down to Rs 19,000 from Rs 19,500/share earlier as it feels operating metrics continue to lag peers.

It further stated that the company has not been able to fully pass on BS-VI related costs, unlike its peers. "Eicher Motors' valuation premium is unsustainable in the absence of volume and margin outperformance. Hence, we cut our FY21 EPS by 11 percent," the report added.

Meanwhile, Morgan Stanley continued to maintain an 'overweight' call on the stock with the target price fixed at Rs 21,073/share.

According to the brokerage, bookings are holding at pre-COVID levels with order book at 45,000 units. Q1 EBITDA was below-estimates due to the incentive scheme offered to restart retail sales.

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First Published:Aug 14, 2020 12:36 PM IST