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Tuesday, December 29, 2009

Eicher Motors - Small Cap Stock To Buy From Automobile Sector

Eicher Motors (EML) started in 1959 as a tractor company, now a well known brand in both the consumer segment (Royal Enfield) and in the commercial segment (Volvo trucks).

This is one more small cap stock from small cap stock list for 2010.

It’s also present in design & development, manufacturing & marketing and auto components businesses.

EML recently underwent restructuring after entering a joint venture with AB Volvo. It transferred its commercial vehicle business to VE Commercial Vehicles, where both have equal controlling interest. Hence, from Q2FY2009, EML’s business spans just motorcycles.

EIL reported a revenue of Rs 927.2 crore for the Q3FY2009 (it follows calendar year) as against Rs 567.4 crore in the same period last year. Its profit for the quarter stood at Rs 44.1 crore compared to Rs 45.2 crore. It sold 7,113 units of EIL branded commercial vehicles (29.3% increase) compared to 5,500 units sold in the corresponding quarter of the previous year.

Institutional investors have raised stakes in EIL from 0.09 per cent in March, 2009 to 19.65 per cent in September, 2009. At the same time, the number of funds invested in it doubled.

Market Cap 1,670.21
EPS (TTM) 11.77
* P/E 53.18
* P/C 35.83
* Book Value 179.68
* Price/Book 3.48
Div(%) 50.00
Div Yield(%) 0.80
Market Lot 1.00
Face Value 10.00
Industry P/E 36.11

The stock is trading at a level of Rs 626, which is a higher value than reached at the peak of the previous rally (Jun 15, 2006-Jan 8, 2008). Discounting its EPS of Rs 28.8 with a P/E of 37.08 (137 per cent higher than its 3-year median P/E), the stock is trading at quite a premium. Though its valuations are in for a re-rating, considering its tie-up with Volvo, it is worth buying stocks of Eicher at dips.

Go back to Small Cap Stock List For 2010

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