Buy Hero MotoCorp; target of Rs 2525: Sharekhan

Sharekhan's research report on Hero MotoCorp

Q4FY20 operating results were in line with street estimates. Lower taxation to beat on profitability. Hero Motocorp stated that about 90% of dealerships have resumed operations and demand is gradually coming back. While economic slowdown due to COVID-19 and steep cost increases due to BS6 transition would impact volumes in FY21, we expect recovery in FY22 driven by increase in farm incomes. At CMP, stock is trading at 14.1x its FY2022 earnings which is lower than its long-term historical average of 16-17x. Hence,

Outlook

we retain Buy rating on the stock with an unchanged PT of Rs 2,525.

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