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HMCL for 2Q recorded a sharp 19% yoy and 8% qoq rise in EPS to Rs.30.2 on back of EBIDTA
margin expansion of 140bps qoq to 15.8%. We expect FY12F consensus EPS upgrade (9%
below us), once clarity emerges on one-time brand change cost and yen impact on royalty
payment in result conference call. Buy
2QFY12 result surprise by 17% on EBIDTA on lower raw material cost
Net sales Rs58.3bn, +28.1% yoy and +2.6% qoq. Our estimate was Rs58.1bn.
The EBITDA margin rose 137bps qoq to 15.8% as raw material expenses as a % to sales
dropped 223bps qoq to 72.5%. Our forecast was 13.6%.
EBITDA was at Rs.9.2bn, up 12.3% qoq. RBS forecast was Rs.7.9bn. Surprise us by 16.7%
and consensus by 19.6%.
Given that the accounting policy for fixed royalty payments changed in 4QFY11, we compare
Hero Motocorp’s results on an EBIT basis for yoy comparison.
The EBIT margins were at 11.0%, down 104bp yoy but up 81bp qoq. RBS estimate was
9.3%. The yen impact on royalty payment dampened EBIT margins, for which we await
management explanation in tomorrows result conference call.
EBIT improved 17% yoy and 10.8% qoq to Rs6.4bn. This was 18.0% above our estimate of
Rs5.4bn.
Other income Rs.798m, +1.8% yoy but down 9.8% qoq. RBS estimate was Rs.550mn
Depreciation expense Rs2.79bn, up 16% qoq, which is driven by yen volatility impact on
royalty payment. Our estimate was Rs2.45bn.
PBT Rs.7.25bn, +15.4% yoy and +8.2% qoq. Our estimate was Rs6.03bn.
Tax rate came at 16.7% vs our forecast of 18.8% but inline with 1Q.
PAT was at Rs6.04bn, +19.4% yoy and +8.2% qoq. Our estimate was Rs4.89bn, surprise of
23.3%.
The company has not given detail of one time expenditure incurred on re-branding. Assuming
it at Rs.750mn, the normalized net profit would increase to Rs.6.79bn, up 34.2% yoy and
21.6% qoq. Our normalized PAT forecast would be at Rs.5.65bn.
Reported EPS is Rs30.2 for the quarter and Rs.58.2 in 1HFY12.
EPS upgrade await for clarity on large yen impact and brand change cost
We feel the Yen45bn royalty payment agreement with Honda to be paid over June 2014 as
part of split agreement, has brought new dimension of currency risk. A 15.6% Rupee
depreciation against yen (April-Sep 2011), will be raising royalty payment by Rs.272mn per
quarter i.e. Rs.5.5 impact of EPS per annum. We await management clarity on hedging policy
and impact on balance sheet items from currency volatility.
We feel company may have spent Rs.750mn towards one-time re-branding expenses, which
are currently part of manufacturing expenses. Hence, adjusted for one-time nature of the cost,
EBIDTA margins jump to 17%, which can be sustainable margins in future quarters. We await
management clarity, before revisiting our estimates.
Consensus EPS of Rs.113.4 for FY12F, which is nearly 9% below our estimate. The better
than expected results, we feel will lead to consensus EPS upgrade post result conference
call.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
HMCL for 2Q recorded a sharp 19% yoy and 8% qoq rise in EPS to Rs.30.2 on back of EBIDTA
margin expansion of 140bps qoq to 15.8%. We expect FY12F consensus EPS upgrade (9%
below us), once clarity emerges on one-time brand change cost and yen impact on royalty
payment in result conference call. Buy
2QFY12 result surprise by 17% on EBIDTA on lower raw material cost
Net sales Rs58.3bn, +28.1% yoy and +2.6% qoq. Our estimate was Rs58.1bn.
The EBITDA margin rose 137bps qoq to 15.8% as raw material expenses as a % to sales
dropped 223bps qoq to 72.5%. Our forecast was 13.6%.
EBITDA was at Rs.9.2bn, up 12.3% qoq. RBS forecast was Rs.7.9bn. Surprise us by 16.7%
and consensus by 19.6%.
Given that the accounting policy for fixed royalty payments changed in 4QFY11, we compare
Hero Motocorp’s results on an EBIT basis for yoy comparison.
The EBIT margins were at 11.0%, down 104bp yoy but up 81bp qoq. RBS estimate was
9.3%. The yen impact on royalty payment dampened EBIT margins, for which we await
management explanation in tomorrows result conference call.
EBIT improved 17% yoy and 10.8% qoq to Rs6.4bn. This was 18.0% above our estimate of
Rs5.4bn.
Other income Rs.798m, +1.8% yoy but down 9.8% qoq. RBS estimate was Rs.550mn
Depreciation expense Rs2.79bn, up 16% qoq, which is driven by yen volatility impact on
royalty payment. Our estimate was Rs2.45bn.
PBT Rs.7.25bn, +15.4% yoy and +8.2% qoq. Our estimate was Rs6.03bn.
Tax rate came at 16.7% vs our forecast of 18.8% but inline with 1Q.
PAT was at Rs6.04bn, +19.4% yoy and +8.2% qoq. Our estimate was Rs4.89bn, surprise of
23.3%.
The company has not given detail of one time expenditure incurred on re-branding. Assuming
it at Rs.750mn, the normalized net profit would increase to Rs.6.79bn, up 34.2% yoy and
21.6% qoq. Our normalized PAT forecast would be at Rs.5.65bn.
Reported EPS is Rs30.2 for the quarter and Rs.58.2 in 1HFY12.
EPS upgrade await for clarity on large yen impact and brand change cost
We feel the Yen45bn royalty payment agreement with Honda to be paid over June 2014 as
part of split agreement, has brought new dimension of currency risk. A 15.6% Rupee
depreciation against yen (April-Sep 2011), will be raising royalty payment by Rs.272mn per
quarter i.e. Rs.5.5 impact of EPS per annum. We await management clarity on hedging policy
and impact on balance sheet items from currency volatility.
We feel company may have spent Rs.750mn towards one-time re-branding expenses, which
are currently part of manufacturing expenses. Hence, adjusted for one-time nature of the cost,
EBIDTA margins jump to 17%, which can be sustainable margins in future quarters. We await
management clarity, before revisiting our estimates.
Consensus EPS of Rs.113.4 for FY12F, which is nearly 9% below our estimate. The better
than expected results, we feel will lead to consensus EPS upgrade post result conference
call.
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