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How Automobiles Work

A business starts a company and expands itself in three or four other businesses After that, the company becomes very big You must’ve heard a story like this a lot of times But have you ever heard That one company operates in 15 other businesses And closes 13 businesses out of that And focuses its entire attention on two businesses And after that the company grows exponentially Today let us talk about such a company Which, out of its 15 businesses, closed 13 of them at one time And focused its entire attention only on 2 businesses And the name of that company is Eicher motors Hello, friends! I, Jagdeep Singh, welcome you to the Groww channel Today we’re going to talk about, not bullet But its maker, and parent company, Eicher motors About how it started its business How it expanded itself After that we will talk about Eicher motors’ financials And about the reasons behind the problems in the auto sector that have come up in the recent times The story of Eicher motors starts from 1948 This company used to import tractors from abroad and sold them in India And at that time this company was run by Vikram Lal And he started expanding this company and the company expanded itself In 15 different divisions Such as, in footwear, garment and many other sectors After this, in 1993 the company did something that changed the company’s entire destiny This company bought more than a 60% stake in Royal Enfield India Royal enfield which was already very successful in India Eicher motor entered this company and started buying manufacturing some new models And reinvented its old bike into a premium bike After that Eicher motor shifted its attention entirely to two domains First, in bike manufacturing and second in truck manufacturing After Siddharth Lal became the CEO, out of the 15 divisions The 13 division who were in loss, he either sold them Or he completely shut them down So, after this Eicher motors shifted its entire attention to two businesses Which was bike manufacturing, that used to manufacture Bullet And the second was heavy commercial vehicle manufacturing After taking this strategic decision, starts the growth story of Eicher motors Its share price which was Rs. 216 at one time, increased to become Rs. 32,000 In 2017 And this gives their investors a multibagger return After business, now let us talk about its financials That how strong the company is financially and how it has performed in the past few years As I already told you that the company mainly operates on two verticals First, motorcycles and second, commercial vehicles So, the motorcycles is their core business from where they get more than 80% of their profits And second, commercial vehicles In this they have a joint venture with Volvo Whose name is VECV First let us talk about the motorcycle business And you know, as I told you that their main revenue Comes from their motorcycle business Then how did they expand themselves there so easily So, in India the motorcycle business mainly operates in three segments First, low segment, where 0-250 cc bikes are sold Second, from 250 to 800 cc And third, bikes above 800 cc So, until now in India mainly two segments operated First, which sold very cheap bikes Second, very expensive bikes So, at that time Siddharth Lal saw that the middle segment Is very empty And there the penetration is very low of any major brand So, here Royal Enfield started targeting some customers And if I talk about the market share today Then this company’s market share is more than 95% And you must be shocked to hear that this is a lot But in the recent times In this segment, some competitors have started entering this segment Because of which their market share has reduced a little In some of the recent quarters If the topic of financials has come up then first we will talk about, in volumes, How Eicher motors has performed, in the past few years And if there is a problem here, then what is it? As you can see on the screen that it talks about sales volume And I have broken this into two parts, first, commercial vehicles, Which tells you that in the case of commercial vehicles How many volumes it sold And second motorcycles So if I talk about motorcycles So, in the financial year 2015-16 Eicher motors sold more than 5 lakhs volume of Royal Enfield After this the number increased In the financial year 2018-19 reached more than 8 lakhs In the same way, if I talk about commercial vehicles Then that number was 51,000 in the financial year 2015-16 Which has now increased To reach around 72,000 But here there is a very interesting that you should pay attention to That in comparison to the financial year 2017-18 In the financial year 2018-19 There wasn’t a lot of improvement in the bike’s volume What is the reason behind Eicher motor’s Growth in the motorcycle segment in the past few years So the biggest reason behind this is that it is the leader in its market segment Their market share is around 95-96% The market leader has a lot of problems with expanding themselves To make volume growth, they have to go the extra mile They have to increase their demand because of which they can increase their volume For Eicher motors to increase their motorcycle volume, they mainly have to take the help of three things First, they have to enter in new segments Because right now, their entire focus is between, 250-800 cc So they have to start their penetration in new sectors So that they can increase their market share Secondly, They have to come up with new models so that they can enter in tier 2 and tier 3 cities Third and a very important way they can increase their volume Is through exports They can manufacture bikes in India and export them in other countries As I told you that export can be a really good way to increase the volume Towards which, Eicher motors has started working So, if I talk about the recent quarter and the financial performance of this company Then in the recent quarters, this company’s revenue also has become less Apart from this, the operating profit margin If a company sold something for Rs. 100 and their expense was Rs. 80 So its operating profit margin comes to be Rs. 20 So, this company’s operating profit margin also has become lesser But its net profit has increased Now you must be thinking that this company’s revenue also came down The margin also came down, so how did its profit increase Because recently there was a tax rate cut in India by which this company enjoyed a benefit And its net profit as compared to last quarter, last year, has increased So the problem that Eicher motors is facing in commercial vehicles has two reasons First, Bharat stage 6 emission norms As you know that Bharat stage 6 emission norms Will become effective after April 2020 Because of which all the companies have to change their models So that they can comply with Bharat stage 6 norms Because of which there was a huge pressure on the auto sector Whose effect was seen on Eicher motors as well The second reason because of which there was a big effect on Eicher motors’ margins Was that in the recent time, it was very important to put ABS on trucks in India ABS is Anti-lock Breaking System Because of which, every company that makes trucks has to put ABS in Because of which, the direct cost of manufacturing will increase And because of which there was a negative effect on their margin And it will be affected in the coming time as well So, this was a fact But if you want to make an investment then you have to do your research You should see your risk And then you should decide where you should make an investment And this video that we’ve made was purely for educational purposes We absolutely do not give the recommendation of buying or selling So, friends, we make 3-4 every week on this channel for educational purposes So that financial knowledge can reach you So if you haven’t yet subscribed to this channel, Then please subscribe!

35 thoughts on “Royal Enfield | Bullet | Eicher Motors Stock Analysis | Automobile Sector | Fundamental Analysis

  1. Sir mai ne mutual fund mai investment Kiya that but mai ne Jo email I'd diya tha us ka password bhulgaya hai or forget v nahi hota hai. To sir Kiya Ka ren sir please help me

  2. Eicher Motors ek esi company hai jo apne business me leader hai jisne ek bar Royal Enfield chalai ho use or koi bike pasnd hi nai aae gi ab unka sales down hai because automobile sector bahit problem face kar raha hai

    Agr tata jesi company ko 2500 cr jitna loss ho skata hai or fir b eicher Motors profitable hai to ye unki Success or management power ko dikhata hai

    Har business starting me progressive bad me pick point or fir decline hota hai or bad me vaps progressive pe aata hai

    So business me utar chadhav to aate rahete hai jo company ese mandi k mahol m b khud ki sale 5% b badhati hai to ye ek achi baat hai

  3. Sir Maine SIP kra tha 2nd installment deduct nhi hua bank se aur Groww app mein show kr rha paid NAV bhi allotment ho gya

  4. Hii I'm confused about few terms. Can anyone help me out?
    I want to know what are these-
    Delivery equity?
    F&O Futures?
    F&O Options?

  5. Namaste sir, my name as par pan siddha nath gupta but app account name- siddha nath to kya mai investment karu aage koi problem nhi hogi

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