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HERO HONDA: Oct-10 volumes above estimates; Highest-ever volumes at 505,553 units
- Hero Honda reported Oct-10 volumes of 505,553 units (v/s est 490,000), a growth of 43% YoY (~17% MoM). These are highest ever monthly volumes for the company.
- Volumes were driven by liquidation of inventory (~35,000 units) at all the plants (Sep-10 dispatches were impacted due to flooding in North) as well as increasing contribution from Line-3 at Haridwar plant. We estimate production of ~470,000 units during Oct-10.
- It has launched 6 new launches comprising a mix of new models, variants and refreshes over last 6 months. Earlier in FY11, the refreshed models of Glamour and Glamour FI were introduced to strengthen company’s leadership in the deluxe segment. Besides the launch of new Super Splendor and Hunk, it also launched new Splendor Pro. Splendor Pro has brought in the biggest-ever change in Splendor since its launch.
- Line 3 at its Haridwar plant is now operational, taking total capacity to 5.4m from 4.8m units. Further, it would be de-bottlenecking capacity at Haridwar taking total capacity at Haridwar to 2.1m and overall capacity to 5.7m.
- We model volume growth of 15% for FY11 to 5.3m units (implying a residual monthly run rate of 452,959 units v/s 432,194 units in FY11YTD), higher contribution from Haridwar plant (~34% of volumes), and 390bp decline in margins to 13%.
- The stock trades at 17.3x FY11E EPS of Rs106.4 and 14.4x FY12 EPS of Rs128. Under Review.
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