Research Digest | May 30, 2017
Last 10 years at a glance:
Motor cycles volumes - 17 times in 10 years (the sell of two-wheelers increased from 3600 to 6000 per month in recent times)
Profits- 30 times in last 10 years – annual Profits rose from Rs. 60 to Rs. 1660 Cr. in FY2017
Shareholders wealth- 100 times in 10 years- Rs 704 Cr Market Cap to current Rs 73500 Cr.
But the history of the brand "Bullet" is not only a 10 years story.
The first Royal Enfield motorcycle was built in 1901 by a company named - The Enfield Cycle Company. Royal Enfield motorcycles had been sold in India since 1949. Currently, Eicher Motor currently owns Royal Enfield Motors.
Considering the high waiting period of 3.5months, the company has recently increased motorcycles production capacity from 7.2 lac p.a to 8.25 lac p.a and has a target to take the production capacity to 9 Lakh units p.a by FY2018-19. The capacity addition will help the company to maintain the Revenue and Profit growth as it has been commanding for last so many years.
The company is presently trading at 39 times FY2018 E EPS. We recommend HOLD though we remain bullish on the stock considering strong management, high margins, great fundamentals, clean balance sheet and strong brand presence.