Lower RM cost at 73.3% (down 200bp q-o-q) led to an Ebitda margin beat at 4.7% (370bp y-o-y, down 130bp q-o-q).
Our industry interaction indicates that MHCV cycle is bottoming-out. Typically, MHCV demand rebounds sharply with economic recovery. The company is best placed among CV OEMs to play the CV upcycle. Considering superior operating performance in Q1 and improved outlook, we upgrade our FY15E/16E EPS to R0.4/2.6 (earlier -0.1/1.8). We maintain a buy rating on the scrip with TP of approximately R45 (an upside of ~36%).
The companys volume fell 8% (down 23.3% q-o-q), reflecting a weak macro-economic environment. MHCV volumes have been flat y-o-y at 14,949 units, while LCV volumes fell 26.3% due to correction in channel inventory.
Motilal Oswal Fin Services