Hero Motocorp may slip to Rs 1850: Basudeb Banerjee

Basudeb Banerjee of Quant Broking told CNBC-TV18, "Hero Motocorp is more of a domestic story. Year-to-date (YTD) volume of Hero is somewhere around 0 to 2 percent up whereas YTD volume of Bajaj Auto is down almost 8-9 percent. Bajaj Auto's domestic motorcycle market share is below 20 percent this time."

He further added, "In Hero Motocorp, the domestic consumption theme is expected to recover 12-18 months down the line, so any uptick in domestic volume from this 2-3 percent for Hero Motocorp to even 5-6 percent along with the cost management initiatives which management is taking, those things blended together for Hero, FY16 can be a great year. The kind of de-rating Hero Motocorp has seen for last two years, that can gradually start seeing some uptick and target multiples of 14-15 times can easily come back. So Hero Motocorp is definitely a good story from FY16 perspective."

"We have a reduce rating on Hero with a price target of around Rs 1,850, but we are confident with FY16 visibility Hero Motocorp definitely deserves a better rating. It can be an accumulating opportunity at current juncture," Banerjee said.

He further said, "For Bajaj Auto anyhow they are down in dumps in terms of volume. Export problems are only increasing. The only saviour is dollar-rupee, so unless and until a major new hit model comes up, RE60 creates a magic in the export markets. I do not see major outperformance from the stock in the near-term. However, the key thing for Hero is the actual execution of the cost cutting initiatives which the management has guided. So from current margin level of 11-12 percent, management is guiding to take it up to 16-17 percent, how much that gets executed is a matter of time, but even partial margin improvement will definitely be a cause for rerating for Hero and it can give a decent upside from these levels."