Eicher Motors Ltd.

Market Price: Rs Date: 27 July 2010

Target Price: Rs 1110 Industry: Automobile

Company Introduction

Eicher Motors is the flagship company of the Eicher group in India and involved in
business activities that range from production of commercial vehicles and motorbikes to
manufacturing the whole range of engineering components to providing engineering
design solutions to a wide variety of clients. It has 4 manufacturing facilities producing
40,000 CV’s and 39,000 motorcycles per annum with providing the bulk of its revenues.

Investment Rationale

(i) Joint Venture with Volvo to bring added momentum to growth. –

Through its JV w ith Volvo , it is setting up a production facility at Pithampur
which will treble its capacity to 125,000 units. The additional capacity will be
used in Volvo trucks and buses worldwide as well as power Eicher’s next
generation of HCV’s that are likely to roll out by 2013.

(ii) Robust demand in the domestic CV segment– On the back of strong

recovery in the Indian economy leading to increased consumer demand, a
robust demand in CV’s can be seen and is expected to continue for the next
few quarters.According to SIAM, the M&HCV segment registered an increase
of 33.5% while the overall CV segment grew at over 38% last year. The sale
has been even more robust since then with the segment clocking over 50% in
May & June 2010.

(iii) Reduction of VAT by the Tamil Nadu government – The TN government

recently slashed the Value added Tax (VAT) from 12.5 % to 4% which will
improve the margins of the automotive industry overall which has been under
stress due to the high component prices.

(iv) Peer Analysis – With a new partner in Volvo who has unparallel experience
in manufacturing of CV’s, the company has seen a complete turnaround by
focusing on market strategy, product differentiation, lean manufacturing,
financial prudence, streamlining of supply chains and aggressive marketing.
Name of Net Profit Total Fixed Inventory Selling Goods Export/ Current
Company Margin Debt/ Asset Turnover Cost Imported Sales Ratio
Equity Turnover Ratio Compon Component( (%)
Ratio ent (%) %)
Eicher M 5.42 0.01 5.88 42.03 7.55 0.52 7.48 4.48
Tata M 3.77 1.06 1.88 13.47 4.77 5.82 9.49 0.84
Ashok 3.04 0.41 1.26 5.36 6.98 5.37 15.93 1.29
Leyland
Swaraj 0.87 2.28 4.04 4.08 2.89 4.38 4.33 2.18
Mazda

* Eicher M– Dec 08, Rest – Mar 09