FSA [Financial Statement Analysis].
Eicher Motors Ltd
1. Top Line
In the last 10 years [2013 to 2022] the firm has shown steady growth
in Net Sales [ Sales Turnover] at a CAGR of 9 % p.a. from Rs 6810
crores to Rs 14452 crores.
The inflation-rate in the Indian economy between 2014 and 2015 was
about 5 % while it came to below 4 % between 2015 and 2020. Post
2020 because of the pandemic it went beyond 4 %. In this scenario, a
CAGR of 9 % p.a. implied real growth of more than 4 % for a major
part of the period.
2. Bottom Line:
The NPM varied between 6% and 20%. The last two years the firm
had shown NPM of 18 %.
3. Cost Structure and Value-addition
The major cost component is Materials-cost [purchased items
accounted for 58% to 54%]. The second major cost is manpower cost,
[varied between 8% to 7 %].
In the initial 4 years the materials accounted for more than 50 %; then
it came down to 50 % at the Covid time. This shows a steady
improvement in material productivity despite a steady increase in
volume of turnover.
Manpower cost in early years was more than 5%. Here also manpower
productivity is found to be better in recent years.
Value Addition has steadily increased from 32% to 42% over the 10-
year horizon. This shows positively on improving productivity on
various fronts continuously.
4. Liquidity and WC Management
The Current Ratio increased from 1.10 in 2014 to 1.13 in 2023.
Normally this should indicate precarious WC management. The
Quick Ratio moved up from 0.80 to 0.71 and Cash Ratio from 0.36 to
0.71 in the same period.
The inventory holding period increase from 40.88 days in 2014 to
52.84 days in 2023 . it saws the at the year of 2024 company return
the money in the 41 days after to the year 2023 company back the
money within the 52.84 [Link] saw’s that the company are increasing
the number of days to convert inventory to the cash.
The cash conversion cycle has been steadily brought down from
31days in 2013 to 20 days in 2022. This confirms the efficient cash
management system the company is employing.
The firm is relying the least on external sources for its working
capital.
5. Operating efficiency
The operating efficacy ratio in the Eicher motors was very good. we
can say that company high efficiency in utilizing the assets .
Eicher motors have for the starting year 2014 was 3.31 and the final
year 2023 was 0.96.
Year on year we have seen that operating efficiency ratio decrees by
70.99%.
Assets turnover ratio will show the Eicher motors will shows ability
of a firm to generate revenue from the capital employee. on the
starting year 2014 Company’s Assets turnover ratio was 1.31 and at
the 2023 it goes down at 0.76.
6. Profitability
The net profit margin for the year 2014 was 6% and at the end 2023 it
goes up at the 20% of turnover. The firm is continuously increasing
its Value Addition, which gives hope that in future the NPM may be
still higher in the Eicher motors. on this basis we can say that Eicher
motors generated profit at the high margin.
Gross Profit Margin has increased from 32 % to 43 % in the10 year
period. This reflects the increasing value-addition and profitability.
apart from it we can say that the Eicher motors retain more profit from
the market.
RONW has Stable over the decade. RONW from the starting time it
will be increasing continuously for the 4 years but after the pandemic
came it will decline in the RONW and at the last year 2023 it touch at
19% , with the help of the RONW we can say that the company’s
financial health was good and financially they are successful .
