Buy Hero Motocorp; target of Rs 3841: Axis Direct

It seems that nationwide lockdown has not much impacted the fertilizer sector. In May 2020, the Indian Fertiliser industry has witness sales growth of 25% to 5 million tonnes as compared to 4 million tonnes in the same month last year.  Coromandel International and Chambal Fertilisers have seen major sales growth in the sector. The research firm Prabhudas Lilladher is bullish on 5 stocks in the sector and among that they expect stock Insecticides India may see the upside of 82 percent, report dated June 09, 2020.

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26 Aug, 2025 12:21

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Axis Direct's report on Hero Motocorp

We interacted with Hero Motocorp (HMCL)’s management. Volumes have recovered well after demonetization. This reflects better in the retail sales which are almost back to flattish YoY after the 50%/22% drop in November/December. However, there are cost pressures in Q4, as commodity prices hit margin with a lag. Price hikes offset this partially.

Outlook

After 5 years of flattish volume (only 2% CAGR), we expect HMCL’s volume to grow by 13/12% in FY18/19. A recovery in rural demand (50% of HMCL’s sales) and measures to recover scooter market share (9% in Feb from 14-15% earlier) is an earnings and rerating trigger. Valuation at 17x and 11x FY18 PE and EV/EBITDA is undemanding for a quality franchise in recovery mode. Maintain BUY with TP of Rs 3,841 (13x FY18E EV/EBITDA).

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