Eicher Motors reported its first quarter 2017 results yesterday and they look like this:

Eicher Motors Q1 – 2017 Q4 – 2016 Q1 – 2016 % change Q-Q % change Y-Y
Total Income 1,555.69 1,532.20 1,095.89 1.53% 41.96%
EBIT 477.60 471.62 289.41 1.27% 65.03%
EBIT Margin 30.70% 30.78% 26.41% -0.08 Bpt 4.29 Bpt
Net Profit 374.60 359.25 236.99 4.27% 58.07%


Eicher Motors is going strong on year on year basis with total income rising 42% and profits by 58%. It doesn’t look anything will stop this business to grow for a while.

Our analysis of valuations starts from the stock price, we see them as what earnings market is expecting from the business. For example, Eicher Motor had opened up strong this morning and is trading at Rs 21,750 per share. This piece of information is telling us that market is expecting Rs 2,000 crore in 2017 or Rs 2,400 crore in 2018 as its earnings.

The consensus of analyst on Eicher Motors expect its profits in range of Rs 1,285 – Rs 1,825 crore in 2017 and Rs 1,810 – Rs 2,365 crore in 2018. The market expectation today is above the analysts forecast. If we punch in the forecast earnings in our calculations for intrinsic value band for Eicher Motors in 2018, then we expect it in range of Rs 13,009 – Rs 21,393 per share.

We expect it to report its 2018 earnings somewhere in the middle of that band and consider today’s market price bit expensive. However, this can change if we receive any new information that tells us that its earnings will explode in coming quarters and then our views on it can change.

Aziz Dodhiya is the chief investment officer for the Valueoperations funds which operates in the Indian market as an FPI (Foreign Portfolio Investor). We do not offer any personal advice to buy or sell any stocks and the views that are shared by Aziz might not incline to your personal investment strategy and this is the reason we advise you to take professional advice before going ahead with our views.