Multi Baggers

30th July 2007

Eicher Motors Ltd.

CMP: Rs 353.55  Target: Rs 550

Eicher Motors Limited is a leading auto manufacturer in India. This New Delhi based company has a strong presence in the light commercial vehicles (LCV’s) segment and has recently made a foray into heavy commercial vehicles (HCV’s) and passenger vehicles. It has two other smaller divisions – a Royal Enfield motorcycle division and the gears division.

Reasons to Buy :

1. Eicher is ramping up its production in the sales of heavy commercial vehicles (HCV’s) and passengers vehicles. Both these segments have grown more than 30% in the last quarter. Because of this the company as a whole has grown more than 25% while the entire commercial vehicle industry is reporting flat sales. This trend will continue and Eicher will outperform all other players in the CV segment.

2. Its troubled motorcycle division has now started making profits and contributing to the bottom line.

3. Last but not the least, Eicher has taken a decision to invite a strategic partner into the commercial vehicle business. Many global majors like Mercedes Benz, Volvo, Hyundai are likely to be interested in taking a strategic stake.

4. Eicher Motor’s valuation is compelling when one looks at the earnings momentum. The company is likely to close the year with an EPS of between Rs35 and Rs40 per Rs10 share.

Concerns:

1. The growth may not be sustained.

2.  Discussions with strategic partners may not be successful.

We believe that both these contingencies are unlikely.

Disclosure

P.N. Vijay is a Director on the Board of Eicher Motors Limited. Some of the clients of P.N. Vijay Financial Services Pvt.  Ltd. have positions in the stock. The views expressed here are purely personal and not those of the Company. The Company has not made available any additional information to the author than what is in public domain.