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Buy Hero Motocorp; target of Rs 3130: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Hero Motocorp has recommended buy rating on the stock with a target price of Rs 3130 in its research report dated August 16, 2022.

August 17, 2022 / 05:24 PM IST
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Prabhudas Lilladher's research report on Hero Motocorp


Hero’s 1QFY23 EBITDA margin at 11.2% (flat QoQ PLe: 11.7%) came below our expectations and was impacted by higher raw material costs (gross margin contraction of ~350bps QoQ). However, management expects margin expansion in the quarters ahead led by commodity cost softening, consistent price hikes and increase in volumes. It targets EBITDA margin recovery to at least 14% vs ~11% currently. Festive season is expected to be healthy on the back of normal monsoons and increase in crop prices. The company is increasing its focus of premiumisation through its XTec models, which are 7- 10% higher in price than the standard ones. We maintain BUY, as we believe Hero will benefit from (1) rural recovery and festive season demand (2) increasing focus on exports and premiumisation (3) incremental savings through Leap savings program leading to margin expansion and (4) success in EV via investment in Ather, in-house mass product (Vida) and JV with Gogoro.



Outlook


Our estimates are largely unchanged. Maintain ‘BUY’ with a target price of Rs 3,130 (at 15x on FY24E standalone EPS, Rs 143 for Fincorp and Rs 63 for Ather).

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Hero Motocorp - 160822 - prabhu

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first published: Aug 17, 2022 05:24 pm
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