Eicher Motors Q4 results and valuations

Eicher Motors comes into our top 10 list of stocks for investments. They released their fourth quarter and full year financial results last Friday. Let us have a look at its results closely and find out whether it is trading now at discounted price.

Eicher Motors Q4 and Full year results

Eicher motors is seeing tremendous growth in its revenues from past few years and have become darling investment especially for the value investor. Let us first compare its quarterly results first.

Eicher Motors Q4 – 2017 Q3 – 2017 Q4 – 2016 % Change Q4 Vs Q3 % change Q4 Vs Q4
Revenues 2,132.54 2,071.42 1,728.99 2.95% 23.34%
  100% 100% 100%    
Profit before taxes (PBT) 648.40 618.18 487.12 4.89% 33.11%
  30.41% 29.84% 28.17%    
Net Profits 460.11 417.08 342.49 10.32% 34.34%
  21.58% 20.13% 19.81%    

 

Eicher Motors is seeing a strong growth in its income from operations which is translating strongly within its profits. Margins are improving better on Q-on-Q basis. The only concern we see is 2.95% growth in its income from operations.

Is this only a onetime event or they are seeing growth deaccelerating could be found from the management commentary which investors should look closely and anchor it as investment idea to invest with Eicher Motors.

Full year Results

Let us compare its full year results and profit margins.

Eicher Motors 2017 2016 % change
Revenues 7,939.45 6,971.13 13.89%
  100% 100%  
Profit Before Taxes (PBT) 2,387.38 1,876.92 27.20%
  30.07% 26.92%  
Net Profits 1,664.65 1,337.65 24.43%
  20.96% 19.19%  

 

It is very clear that revenue growth is helping them to lift up their profitable margins. In other words, the cost of production is falling down due to the growth in their revenues.

 

Valuations

Before their financial results we were of the opinion that they are trading within our expected 2018 valuations zone. But after their quarterly results we found that they are trading approximately 9% premium to its upper band of 2018 valuations.

There is a good news for the investors who still wants to buy at premium price this stock. That Eicher Motors is trading within its 2019 valuation zone. Patient investors should not worry to buy such businesses even looking at 2019 valuations. By saying that, it is also important to do a bit of homework on capital allocation while investing for the long term.

Also remember that such quality businesses normally trade at 3 – 4 years valuations and makes it hard for smart investors to buy them.