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February 13, 2002

Eicher Motors Ltd, belonging to the Eicher group, is a leading commercial vehicle (CV) manufacturer, with a significant presence in the 6 to 9 ton segment. It has a market share of 32% in this segment. Lately, the company has decided to enter the medium/ heavy commercial vehicle segment. Recognizing the need for "environment friendly vehicle", EML has developed a new engine compliant with Bharat 2001 norms in collaboration with AVL of Austria.

The company launched new modern and sophisticated bus at around Rs8 lakh price range.

It has also expanded its nearly 350 service centers all over India and improved its mobile services. Eicher is trying to enter the exports as well as south Indian market.

LCV sales was almost flat in January 2002 at 807 units. Sales during the 10-month (April-January) period stood at 6,236 units, up marginally by 5.37% than 5,918 vehicles sold in the corresponding period same.

Results Analysis

The company has recorded impressive Q3 FY02 results. Sales stood at Rs1.19bn, a jump of 26.8% against the corresponding period of Rs942.5mn. Operating profit shot up by 45% against the previous year to Rs122.7mn. However, net profit gained marginally by 6% to Rs58.7mn against the previous year, because of higher tax provisioning of Rs32.6mn against Rs5mn last year. The company is said to have reduced its manpower by around 29% in the last 18 months. This is expected to reduce costs to the tune of around Rs200mn on an annualized basis.

The stock is trading at a multiple of 5.8 times FY02 earnings. The stock had a dream run in January where it gained nearly 100% and has breached its 52- week high of Rs49. It also witnessed massive buying interest by institutions that has resulted in average volumes rising six times to 15,000 shares in the last 15 days. Currently, it is trading at Rs42. The stock is expected to give handsome returns in the medium to long term period on the back of a turn around in the fortunes of the automobiles segment.

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