Hold Hero Motocorp; target of Rs 2667: Axis Securities

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26 Aug, 2025 12:21

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Axis Securities's research report on Hero MotocorpHero Motocorp’sQ3EBITDA was 5%above estimate,as low commodity costs and cost-cutting initiatives drove strong gross margin (+470 bps YoY/+130 bps QoQ). EBITDA margin at 15.8% beat our/consensus estimate of 15%.Management foresees commodity prices to remain benign and expects further benefits from cost saving initiatives. However, we believe rising share of scooters (less profitable) and export foray will restrict further margin expansion. Our view of 2Ws underperformingand 4Ws in early upcyclehas played out, and is likely to continue in FY17 as well.Subdued rural demand (~50% of sales) has added to the woes;monsoon will be key monitorable. We maintain our estimates and HOLDrating withtarget price of Rs2,667 (10x FY17E EV/EBITDA).

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