Accumulate Hero MotoCorp; target of Rs 3066: Dolat Capital

Dolat Capital's research report on Hero MotoCorp

HMCL numbers were marginally below estimates due to input cost pressure and increase in marketing expenditure due to the festive season. HMCL did not resort to price cuttings to push volumes and hence underperformance on volume front as compared to industry. With industry also looking to go back to pricing sanity, we expect HMCL volumes to improve from the current levels. With 2 products – 1 in scooter and 1 in motorcycle, launch in FY20, HMCL is well geared up in all product categories. HMCL management believes that volumes should improve from Q1FY20 and some early signs are visible during January 2019. HMCL stock price has been beaten down due to industry level issues as well as margin underperformance.

Outlook

We believe that stock is undervalued and considering that industry volume should improve along with margins, we maintain Accumulate. We rollover valuations to FY21E with a target of ` 3,066.

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