Hold Hero MotoCorp; target Rs 1969: Firstcall Research

Firstcall Research has recommended hold rating on Hero MotoCorp with a target price of Rs 1969 in its March 11, 2013 research report.

"Hero MotoCorp has merged with Hero Investment Pvt. Ltd. to create incremental shareholder value of Hero MotoCorp Ltd. Hero MotoCorp commenced construction of its fourth manufacturing plant and the Global Parts Centre at Neemrana in Rajasthan with an investment of about Rs. 550 crore. During the quarter, the robust growth of Net Sales is increased by 2.59% to Rs. 61876.20 million. Hero MotoCorp has also soon going to announce the launch of Brand Hero in its new markets in Latin America and Africa. Hero MotoCorp sold a record 5,57,797 units of two-wheelers in January this year. This is HMCL's highest-ever sales for any single month. The Company new facilities are expected to be operational towards the end of the Financial Year 2013-14. Net Sales and PAT of the company are expected to grow at a CAGR of 9% and 5% over 2011 to 2014E respectively.

The company's net profit decreased to Rs.4878.90 million against Rs.6130.30 million in the corresponding quarter ending of previous year, a decrease of 20.41%. Revenue for the quarter rose by 2.59% to Rs.61876.20 million from Rs.60314.50 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.24.43, registering 20.41% decreased over previous year period. Profit before interest, depreciation and tax is Rs.8687.50 millions as against Rs.10192.70 millions in the corresponding period of the previous year.

Outlook and Conclusion: At the current market price of Rs.1742.90, the stock P/E ratio is at 16.91 x FY13E and 15.69 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.103.04 and Rs.111.09 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 9% and 5% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 9.78 x for FY13E and 9.09 x for FY14E. Price to Book Value of the stock is expected to be at 5.48 x and 4.06 x respectively for FY13E and FY14E. We recommend 'HOLD' in this particular scrip with a target price of Rs 1969 for Medium to Long term investment," says Firstcall Research report.

Public holding more than 90% in Indian cos

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