In an interview with CNBC-TV18's Anuj Singhal and Sonia Shenoy, Mahantesh Sabarad, Senior analyst at Fortune Equity Brokers, spoke about his reading of the auto sector and his top pick from the lot.
Below is a verbatim transcript of the interview. Also watch the accompanying video. Q: First a word on Hero Honda and the numbers post the numbers in the conference call. There were a couple of positives like the royalty overhang coming off, margins bottoming out but there was nothing so surprising for the market. Do you think there was an overreaction to the stock on the upside? A: It seems to be an overreaction on the upside. Actually if you look at the past four quarters, not just the immediate quarter Hero Honda has just about done Rs 500 crore at the bottom line level. They have been dogged with issues; firstly, for the NCCD tax that they had to pay earlier, moreover, there was a royalty issue the company dealt with. The company has changed an accounting policy with the results that they have capitalized the future payable royalty to Honda and pushed it below the EBITDA margin level. I think the market is simply reacting to the fact that the headline EBITDA margin is 15.5% so, all the margin worries are over. But, we should look at the EBIT margins. The EBIT margin is quite weak at just about 11%. So, we have downgraded the stock impact after the results. Q: ItDiscover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
