Hold Hero MotoCorp; target of Rs 2422: Arihant Capital

Arihant Capital 's research report on Hero MotoCorp

Hero MotoCorp reported weak performance during Q4FY20 with a 20.9% YoY fall in revenue to Rs 62,384 mn was impacted due to disruptions caused by covid-19 in late March. It had reported a revenue of Rs 78,850 mn in the corresponding quarter last year. Profit of the company declined by 15% YoY to Rs6207 mn in Q4FY20 while on a sequential basis profit fell by 29.50%.EBITDA stood at Rs 6599mn down by 38.3% YoY for the Q4FY20 as compared to Rs 10,693 mn for the Q4Y19. EBITDA margin narrowed to 10.6% in Q4FY20 as compared to 13.6% in Q4FY19. The two-wheeler major sold 13.34 lakh units during the quarter under review, down 25.71 % against 17.81 lakh units in Q4FY19.

Outlook

We value Hero MotoCorp at PE of 15x to FY22 EPS estimate of Rs 161.5, which yields a target price of Rs 2,422. We maintain our Hold rating on the stock.

Hero MotoCorp 24062020-arihant