Eicher Motors Ltd. - Royal Enfield's recent Sales Growth update.

Before you read this post, I would request you to check out my report on this company posted couple of months ago. Here is the link to that report:

Eicher Motors Ltd - Analysis of Royal Enfield sales growth.

Sales of Royal Enfield bikes has remained restricted to a monthly figure of around 50,000 units for the last few months now. Possibly primarily due to capacity limitations. The chart above shows the 3-months moving average of Royal Enfield's monthly sales numbers. We can see the sales plateauing just under the 50,000 units mark for the last 4 months. Once the expanded capacity comes on stream, we will see the sales average breaching past that 50,000 barrier.

One thing that I had mentioned in my report two months ago was that I am expecting Growth rate of Domestic sales to come down substantially from over 50% levels to something closer to 30% by the end of the year. At the same time I was expecting the company to push more volumes into the Export market. Export sales forms just about 2-3% of the company's monthly numbers currently. But the same could be touching 5% by the end of this year and be around 10% by end of 2018. For this to happen, the Export sales should grow at a much faster pace than the company's Domestic sales. I am happy so say that things have already started moving in the direction I had expected. Have a look at the chart below, which shows the progress of Y-o-Y Growth rates of both Domestic & Export sales, again on a 3-months moving average basis.

As we can see, the Y-o-Y Growth rate of Royal Enfield's Domestic sales has sharply come down from 60+% level in March'16 to less than 40% level in June'16. At the same time the Export sales growth rate has improved from about 45% in March'16 to over 80% in June'16. Going forward I am expecting this trend to continue with Export growth to be far higher than Domestic Growth. Since Domestic Sales currently forms about 97% of Royal Enfield's sales, any slowdown in it's growth rate will bring down the over growth rate of the company's Total sales. As I had mentioned in my previous report, even a growth rate of 25 to 30% on such a large base is still very very respectable.