Accumulate Hero Motocorp; target Rs 2320: Dolat Capital

Dolat Capital is bullish on Hero Motocorp and has recommended accumulate rating on the stock with a target of Rs 2320 in its July 19, 2012 research report.

"Hero Motocorp reported top-line revenue at `62.5bn, up 10% YoY led by 7% YoY volume growth. The company sold 1.64mn two wheelers against 1.52mn sold in same quarter previous year. It had sold 1.57mn two wheelers in 4QFY12. The company’s operating margins improved 60bps YoY to 15.0% purely because of higher volumes and better realisations. However, it had reported 15.3% in 4QFY12. The dent in margins over previous quarter is due to weakening of the rupee. The management mentioned margins may continue to remain under pressure in the coming quarters due to currency impact."

"HMCL maintained its market share at 56.6% in 1QFY13. However, due to production issues, it lost market share in the scooter segment from 18.2% in 1QFY12 to 15.9% in 1QFY13. The company is launching its new product ‘Maestro’ during this quarter and expects to regain its market share."

"The company will be re-launching all its premium segment bikes during this quarter. Apart from that, the company has newly launched Impulse, Ignitor and Maestro. It has planned a capex of `25bn over the next 18-24 months to add new capacity in its two plants at Rajasthan and Gujarat. The total capacity addition will be ~2.2mn and take its total capacity to 9mn by end of FY14. Also, it has planned to enter Africa and Latin America by end of this calendar year. We believe it’s the best bet in the two wheeler segment. The stock is currently trading at 13.5xFY14 EPS. We maintain Accumulate on the stock with a target price of Rs 2320," says Dolat Capital research report.

Public holding more than 90% in Indian cos

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