Hold Hero Motocorp; target of Rs 2005: Arihant capital

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Hold Hero Motocorp; target of Rs 2005: Arihant capital

Arihant capital markets has recommended hold rating on Hero Motocorp with a target of Rs 2005, in its January 20, 2012 research report.

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Arihant capital markets has recommended hold rating on Hero Motocorp with a target of Rs 2005, in its January 20, 2012 research report.

"Hero Moto reported a strong quarter amidst a challenging environment for the domestic auto industry. Reported operating EBITDA at 15.63% was aided by a marginal correction in Raw Mat prices and lower SG&A expenses on a yoy basis."

"Q3 Net Revenue at Rs 5984 crores was up by 17% on a yoy basis (3.4% qoq), aided by a 11.3% yoy increase in unit sales and 5% yoy improvement in Net Realizations. Net Realizations per unit for the quarter came at Rs 37650, a 5% increase yoy, (0.5% yoy). In term of product breakup, (domestic and exports) overall Scooter sales continued to robust, growing in Q3 by 20.4% on a yoy basis, but motorcycles sales volume growth was more tepid at 10.6% yoy for the quarter. In terms of geographical breakup, HMC's overall domestic portfolio grew by 11% for the quarter on a yoy basis, much slower than 20% + growth recorded in previous quarters, mainly on account of the huge base effect of Q3 FY11 and overall slowdown in the industry."

"Exports growth (highly erratic due to small base), grew in Q3 by 6.73% on a yoy basis. Q3 Operating EBITDA (adjusted for the effect of amortization of intangibles, at a constant rate) came at Rs 761 crores, a growth of 31.9% yoy (2.9% qoq), with the adjusted Operating EBITDA margin at 12.6% (increase of 150 bps yoy, but flat qoq). The company however reported Operating EBITDA (unadjusted for amortization) at Rs 943 crores, at a margin of 15.6%. Margins were aided by higher net realizations, marginal correction in Raw Mat costs on a yoy basis, and slightly lower Other Expenses due to increased operating leverage," says Arihant capital markets research report.  

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