Sharekhan's research repor on Hero MotoCorp
Hero MotoCorp (Hero) posted better-than-expected Q1FY2021 results. Realisations growth of 21% was ahead of estimates driven by price increases and better mix. OPM of 3.6% and Net profit at Rs. 61 crore were ahead of our estimates. Hero is witnessing consistent improvement in demand on m-o-m basis since the lockdown restrictions were relaxed. Hero has already reached 95% of Pre-COVID sales in July 2020 and the trend has sustained in early August as well. As per Hero, the trend is fundamental in nature and not just pent-up demand. Hero is expecting good demand for the festive season; and with the inventory lower than normalised levels, wholesale sales are expected to improve further. We have fine-tuned our earnings estimates for both FY2021 and FY2022.
At the CMP, the stock is trading at 15.2x its FY2022 earnings, which is lower than its long-term historical average. Hence, we retain our Buy rating on the stock with a revised PT of Rs. 3,300.
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