customised product in CY15. Although our cash flows build in EML’s share of the investment, we have not factored in contribution from the new launch due to lack of visibility at this stage. Given PI’s historic track record and strong execution capabilities across markets, we expect this JV to also be value accretive.
Upgrade to Buy: What has changed? Contrary to our expectations of overall growth being restricted by cyclical downturn in commercial vehicles, we note the following: Motorcycle demand continues to stay ahead of supply; commercial vehicles performing better than the competition with higher profitability despite worse than anticipated demand slowdown; engine business has wider scope and is likely to be more profitable than estimated earlier.
Raising forecasts: We raise Eicher Motors’ EPS forecasts by 25% in CY14e and 46% in CY15e. Much of this is driven by the motorcycle business, both on revised volume and margin assumptions, and to a limited extent on VECV’s engine business. We largely retain forecasts for the CV business, with lower volumes offsetting increased assumptions on margins.