Buy Hero Motocorp of Rs 3380: Emkay Global Financial

Emkay Global Financial is bullish on Hero Motocorp has recommended buy rating on the stock with a target price of Rs 3380 in its research report dated February 08, 2023.

Broker Research

February 13, 2023 / 18:12 IST

Emkay Global Financial's research report on Hero Motocorp

Hero Motocorp’s Q3FY23 EBITDA declined by 4% YoY to Rs9.2bn, coming in 3% below our estimates, on higher spends in the emerging business unit. Revenue increased by 2% to Rs80.3bn, in line with estimates. We maintain our positive stance, underpinned by: 1) expectations of 8% volume CAGR over FY23-25E on a cyclical upturn in domestic 2Ws and new products; 2) margin expansion of 160bps over FY23-25E emanating from better scale and cost savings; and 4) inexpensive valuations. The stock trades at P/E of 15x/14x on FY24/25 estimates.

Outlook

We reaffirm BUY on the stock, with TP of Rs3,380/sh (unchanged), based on 17x core FY25E EPS and value of investments/cash at Rs517/share. Key downside risks: lower-thanexpected demand in key geographies, increased competitive intensity, failure of new products, and adverse movement in commodity prices/currency rates.

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