Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hero Honda Motors Ltd
(HROH.BO / HH IN)
Best play on rural growth
■ Main investment thesis: We expect the Indian two-wheeler industry to grow
at about 15% p.a. over the next few years, higher than the historic growth
trend of 11-12%. Increasing penetration in rural India, driven by rising
income and improving infrastructure and higher ownership among women in
urban areas are key growth drivers. Hero Honda (HH) dominates the Indian
two-wheeler market with a share of 44%. It has lost market share in the last
one year, giving up the extra-ordinary gains it had registered the previous
year. We believe that these have now reverted to sustainable levels and
expect HH to start growing in line with the market. We expect a similar
recovery in margins, driven by the current supply situation and competitive
structure which leave HH with tremendous pricing power.
■ India exposure and plans: More than 90% of Hero Honda’s volumes are
derived from the domestic market. While focus on exports will likely increase
post the HH JV break-up, we expect India to remain the most important
market for HH, at least in the medium term. HH has the best positioning in
semi-urban/rural India among its peers. Rural sales account for nearly 50%
of the company’s sales. Its market share in rural India is about 1,000 bp
higher than in urban India. With years of consistent performance to back it,
Hero Honda’s motorcycles have the best resale value, a key feedback
parameter for consumers, especially in smaller towns and rural areas.
■ Impact of survey findings: Our survey results point to a certain ‘small town’
optimism, where smaller cities expect higher income growth and are also
more inclined to make purchases. Given the brand positioning of Hero
Honda’s products and its wide sales and service network, it is extremely well
positioned to cater to this growth. We also observe an increased appetite for
credit, which if combined with higher availability of financing could provide an
upside risk to industry growth rates
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hero Honda Motors Ltd
(HROH.BO / HH IN)
Best play on rural growth
■ Main investment thesis: We expect the Indian two-wheeler industry to grow
at about 15% p.a. over the next few years, higher than the historic growth
trend of 11-12%. Increasing penetration in rural India, driven by rising
income and improving infrastructure and higher ownership among women in
urban areas are key growth drivers. Hero Honda (HH) dominates the Indian
two-wheeler market with a share of 44%. It has lost market share in the last
one year, giving up the extra-ordinary gains it had registered the previous
year. We believe that these have now reverted to sustainable levels and
expect HH to start growing in line with the market. We expect a similar
recovery in margins, driven by the current supply situation and competitive
structure which leave HH with tremendous pricing power.
■ India exposure and plans: More than 90% of Hero Honda’s volumes are
derived from the domestic market. While focus on exports will likely increase
post the HH JV break-up, we expect India to remain the most important
market for HH, at least in the medium term. HH has the best positioning in
semi-urban/rural India among its peers. Rural sales account for nearly 50%
of the company’s sales. Its market share in rural India is about 1,000 bp
higher than in urban India. With years of consistent performance to back it,
Hero Honda’s motorcycles have the best resale value, a key feedback
parameter for consumers, especially in smaller towns and rural areas.
■ Impact of survey findings: Our survey results point to a certain ‘small town’
optimism, where smaller cities expect higher income growth and are also
more inclined to make purchases. Given the brand positioning of Hero
Honda’s products and its wide sales and service network, it is extremely well
positioned to cater to this growth. We also observe an increased appetite for
credit, which if combined with higher availability of financing could provide an
upside risk to industry growth rates
No comments:
Post a Comment