KRChoksey is bullish on Hero Motocorp and has recommended buy rating on the stock with a target of Rs 2146 in its January 18, 2013 research report.
“Hero Motocorp reported marginal growth in Net sales 2.6% Y-o-Y to Rs 6187.6 cr. There was degrowth in volume by 1% Y-o-Y, but realization increased slightly by 3.6% Y-o-Y. EBITDA was down by 17.4% y-o-y and up by 8.3% q-o-q to Rs 778.7 crores. Margins declined by 305bps y-o-y and 128bps q-o-q. Net profit declined by 20.4% y-o-y to Rs 488 crores on the back of lower operating margins.”
“Hero Motocorp recorded Net sales of Rs 6188 crore, up by 2.6% y-o-y on the back of flat volume growth of -1% y-o-y and improved realizations (up by 3.6%y-o-y). On Q-o-Q basis sales were up by 19% on the back of strong volumes which were up by 18% coupled with 1% realization growth. Total sales for the quarter stood at 15,73,135 vehicles and going forward we expect Hero Motocorp to maintain run rate of 5 lac+ vehicles per month. Operating profit declined by 17.4% y-o-y to Rs 778.7 crore. Increase in raw material cost and other expenses impacted operating margin. On sequential basis EBITDA was up by 8.3% due to growth in volumes by 18% q-o-q and decrease in raw material cost which was offset by increase in other expanses and employee cost. Consequently margins declined by 128bps q-o-q and by 305bps y-o-y.”
“We expect 2-wheeler industry to grow at 3-4% going ahead in the current fiscal, however we believe FY14 will see growth returning in the two wheeler segment & we expect the industry to grow by 12-13% in FY14. We expect the recent spends by Hero on branding & the foray in to the export markets will help Hero reposition itself again in the domestic markets & establish itself in the export markets. However we expect the company to grow inline with the industry growth rate of 12-13% in FY14. At the CMP of Rs. 1750 per share Hero is trading at a multiple of 12.2x FY14E. We recommend a BUY rating on the stock with a price target of RS.2146 per share, implying an upside of 23% from the current levels,” says KRChoksey research report.
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