Accumulate Hero Motocorp; target of Rs 5162 Prabhudas Lilladher

Prabhudas Lilladher recommended accumulate rating on Hero Motocorp with a target price of Rs 5162 in its research report dated November 18, 2024.

Broker Research

November 18, 2024 / 10:19 IST

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Prabhudas Lilladher's research report on Hero Motocorp

HMCL's Q2FY25 standalone revenue increased by 10.8% YoY, in-line with our estimates while it was 2.5% higher than consensus estimate. The growth in revenue was driven mix improvement across its category as well as healthy contribution of spares revenue. Gross profit increased by 17.4% YoY while margin expanded by 188bps YoY to 33.3% (PLe: 32.5%), as a result of stable input cost and better operating leverage. EBITDA increased by 14.1% YoY with a margin expansion of 43bps YoY to 14.5% (PLe: 14.8%). Healthy overall performance led its PAT to increase by 14.2% YoY. We reduce our estimates by 2-10% over the forecast period to factor in competition in the premium segment hampering their premiumization focus. Additionally, investment towards EV portfolio expansion shall suppress margin expansion despite decent mix improvement across its portfolio.

Outlook

However, it remains in a good position to benefit from rural demand revival and steady growth in export business owing to expansion into different regions. Factoring this, we retain our “ACCUMULATE” rating with a TP of Rs5,162 (previous Rs5,906), valuing its core business at 18.5x on its Sept’26 EPS its stake in NBFC & Ather at Rs227.

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