New model rates Rs 7k above the old Classic 350: Eicher motors (EIM IN, Reduce) launched its new 2021 Royal Enfield (RE) Classic 350 on Sept 1, 2021. The new model begins at a value of Rs 184k, which is Rs 5k greater compared with the preceding generation model. The new model’s specifications are largely related to these of Meteor 350 (they share the very same engine, energy functionality specifications, as effectively as numerous elements). However, the new Classic 350 comes equipped with a various fuelling map, ignition timing, and exhaust layout (compared with Meteor 350). It also has a new instrument panel, with LCD and fuel gauge.
YTD in FY22F, RE has sold ~213k motorcycles, recording a month-to-month volume run price of ~43k units. This is under our estimate of ~60k units for FY22F. Higher pricing might influence the company’s sales, in our view, specifically as: 1) the value (and specification) differentiation amongst Meteor 350 and Classic 350 has decreased even additional, which might lead to marketplace cannibalisation and 2) the value of Classic 350 has been elevated Rs 9k considering that Dec 2020 (excluding the most recent improve), a lot greater than the improve by its competitors (up Rs 5k considering that Dec 2020).
Even with the launch of new Classic 350, our implied volume run-price of ~73k units for the remaining months of FY22F (Sep-21-Mar-22) has downside dangers, in our view. For RE, we have at the moment constructed in unit volume forecasts of 723k (+18% y-y), 819k (+13% y-y) and 888k (+8% y-y) more than FY22, FY23F and FY24F, respectively, with EBITDA margin forecasts at 24.6%/25%/25.1% (unchanged).
We continue to worth RE at 22x typical FY23-24F core EPS, at the mid point of our anticipated trading band of 20-25x P/E. The stock at the moment trades at ~27x FY23F core EPS we retain our Reduce rating on the stock.