Exactly three months ago I had written a report on 'over-valuation' of Eicher Motors Ltd. (Click here for that report). In that report I had mentioned Volvo selling more than half of it's holding in Eicher Ltd at a price of little over Rs.15,000/- per share.
During this 3 months period, Eicher Motors stock corrected a bit from levels of over Rs.16,000 to about Rs.14,000/-. But the stock again rallied some more post announcement of March'15 quarterly results to hit a new high of little over Rs.19,000/-. This rally seems to have prompted Volvo to sell the remainder of it's holding too. The sale of the remaining 10 lakh shares, constituting about 3.7% of Eicher Motors' equity was done today morning at a price between Rs.17200 & Rs.18200/-, at a discount to yesterday's closing price. Remember at this price, Eicher Motors' stock trades at about 70 times it's EPS, which ( I would like to repeat ) is very very high valuation for a manufacturing company. I think at the current price Eicher Motors stock is already pricing in growth for the next 2 years atleast, if not more.
According to me, Volvo has done the smart thing of booking all it's profit at current valuations. It's 7-8 years old investment has yielded returns of about 25 to 28 times it's investment. And even after this sale of holding, Volvo's JV with Eicher for manufacture of HCVs stays un-impacted. Since the JV is doing absolutely fine on the business front, I am not expecting Volvo to pull out of it anytime in the near future. But Volvo selling it's over 8% holding in Eicher Motors Ltd in two tranches within a space of just about 3 months is ample hint to other investors. Firstly this deal certifies that the stock is clearly over-valued, because Volvo's JV with Eicher too was part of the the Consolidated entity of Eicher Motors Ltd. Secondly, the floating stock of Eicher Motors Ltd has suddenly increased by nearly 22 lakh shares in the last 3 months.
( Click here for Eicher Motors' Easy Results Summary page. )
According to me, Volvo has done the smart thing of booking all it's profit at current valuations. It's 7-8 years old investment has yielded returns of about 25 to 28 times it's investment. And even after this sale of holding, Volvo's JV with Eicher for manufacture of HCVs stays un-impacted. Since the JV is doing absolutely fine on the business front, I am not expecting Volvo to pull out of it anytime in the near future. But Volvo selling it's over 8% holding in Eicher Motors Ltd in two tranches within a space of just about 3 months is ample hint to other investors. Firstly this deal certifies that the stock is clearly over-valued, because Volvo's JV with Eicher too was part of the the Consolidated entity of Eicher Motors Ltd. Secondly, the floating stock of Eicher Motors Ltd has suddenly increased by nearly 22 lakh shares in the last 3 months.
( Click here for Eicher Motors' Easy Results Summary page. )
No comments:
Post a Comment