Buy Hero MotoCorp; target of Rs 3810: Centrum

Centrum's research report on Hero MotoCorp

In keeping with its strategic focus on higher-engine capacity products, Hero MotoCorp today launched its first 125 cc scooter, Destini 125. The powerful Destini 125 aims to fortify Hero’s presence in the fast-growing 125cc scooter segment. The new Destini 125 will be available from tomorrow across Hero dealerships in the Delhi-NCR region, at a price of Rs. 54,650 (Ex-Showroom) for the Lx variant and Rs. 57,500 (Ex-Showroom) for the Vx variant. The retail sales of the Destini 125 in other markets across the country will commence over the next 3-4 weeks. Destini 125 is also the first and only scooter in India to feature the highly efficient idle start-stop-system, based on Hero’s revolutionary i3S technology. The scooter offers similar power and torque as compared to its peers at attractive price (please refer Exhibit 1 and Exhibit 2).

Outlook

We value the stock on our differentiated AOCF/EV methodology and arrive at a TP of Rs3,810 (17.3x FY20E core EPS, plus Rs98 for Hero Fincorp), implying 39.5% upside from current levels. We maintain a ‘BUY’ on the stock of the company.

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