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Hero Honda
Hero Honda registered in-line net sales growth for 4QFY2011, up by strong 30.8% yoy
and 4.4% qoq to `5,391cr. Growth was primarily driven by a 22.6% yoy increase in
volumes and a 6.7% yoy increase in average net realisation, following better product mix
and price increases. On a sequential basis, volumes and realisation grew by 1.8% and
2.6%, respectively.
As per the new licensing agreement with Honda Motor Co., Honda has given Hero Honda
the rights and license to manufacture, assemble, sell and distribute certain products/parts
and export license for certain products under intellectual property rights, which now forms
a part of the intangible asset of Hero Honda and will be amortised over a period of 42
months starting from January 2011. As a result of this change, the company reported an
amount of ~`177cr under depreciation and amortisation, which earlier used to be
reported as part of other expenditure. Adjusting for this change in the accounting policy,
the company’s operating margin came in 100bp ahead of our estimates at 12.1%.
However, margin declined by 520bp yoy and 130bp qoq. Margin contraction can be
attributed to the increase in input costs, which led to a 574bp increase in raw-material
costs for the company. Net profit for the quarter declined by 16.2% yoy to `502cr mainly
due to the decline in operating margin. Increased tax rate during the quarter also affected
bottom-line performance negatively.
At `1,600, Hero Honda is trading at 15x and 13.9x FY2012E and FY2013E earnings,
respectively. We maintain our Neutral rating on the stock and shall come up with a
detailed result update soon.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hero Honda
Hero Honda registered in-line net sales growth for 4QFY2011, up by strong 30.8% yoy
and 4.4% qoq to `5,391cr. Growth was primarily driven by a 22.6% yoy increase in
volumes and a 6.7% yoy increase in average net realisation, following better product mix
and price increases. On a sequential basis, volumes and realisation grew by 1.8% and
2.6%, respectively.
As per the new licensing agreement with Honda Motor Co., Honda has given Hero Honda
the rights and license to manufacture, assemble, sell and distribute certain products/parts
and export license for certain products under intellectual property rights, which now forms
a part of the intangible asset of Hero Honda and will be amortised over a period of 42
months starting from January 2011. As a result of this change, the company reported an
amount of ~`177cr under depreciation and amortisation, which earlier used to be
reported as part of other expenditure. Adjusting for this change in the accounting policy,
the company’s operating margin came in 100bp ahead of our estimates at 12.1%.
However, margin declined by 520bp yoy and 130bp qoq. Margin contraction can be
attributed to the increase in input costs, which led to a 574bp increase in raw-material
costs for the company. Net profit for the quarter declined by 16.2% yoy to `502cr mainly
due to the decline in operating margin. Increased tax rate during the quarter also affected
bottom-line performance negatively.
At `1,600, Hero Honda is trading at 15x and 13.9x FY2012E and FY2013E earnings,
respectively. We maintain our Neutral rating on the stock and shall come up with a
detailed result update soon.
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