Prabhudas Lilladher's research report on Hero MotoCorp
While Hero MotoCorp’s (HMCL) Q2FY18 performance was marginally below expectations, operating margins at 17.4%, lower 20bps YoY but higher 110bps QoQ, surpassed our expectations of 16.9%. Revenue growth was 7.3% YoY to Rs83.6bn (PLe: Rs89.4bn), while EBITDA grew 6.3% YoY to Rs14.6bn (PLe: Rs15.1bn). The margin surprise was mainly on account of other expenses as a % of sales being lower 150bps YoY as well as QoQ. With higher depreciation provision and tax rate, along with lower non‐operating income, net profit for the company was flat YoY at Rs10.1bn (PLe: Rs10.8bn).
Outlook
We maintain ‘Accumulate’ with a price target of Rs4,302 based on 20x Sep’19 EPS. At the current price, the stock is trading at 20.5x FY18E and 19.3x FY19E EPS.
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