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A “ h e r o ” i n p r o f i t , f o r v a l u a t i o n s o t h e r w i s e …
Hero MotoCorp Ltd (HMCL) reported Q2FY12 numbers, which were
above our estimates with net sales at | 5784.3 crore (I-direct estimate: |
5586.7 crore), a 28.2% YoY and 2.6% QoQ jump. The growth was volume
led (~20.1% YoY, 1.0% QoQ increase) at 1.54 million units with festive
demand leading the momentum. Realisations on a per unit basis jumped
1.8% QoQ at | 40,131 as ~1% price hike was incurred at the end of
Q1FY12. EBITDA margins reported were higher at 15.9% (up ~140 bps
QoQ) as the twin impact of lower RM/unit (1.4% QoQ) and favourable
realisations helped cumulatively. PAT came in stronger than estimates at
| 603.6 crore (up ~20% YoY) due to a strong operational performance.
Highlights of the quarter
HMCL has witnessed another robust quarter with volume growth at 20%
YoY (1.54 million units), 22% YTD (3.1 million units) and continues to
maintain motorcycle market share of ~56% in the domestic market. The
management remains confident of clocking sales of ~6.4 million units for
FY12 and HMCL is on course to touch 7.0 million unit capacity by March
2012. It had undertaken a price hike at the end of Q1FY12 of ~| 500-700
whose complete impact has become visible in Q2. HMCL has decided to
set up a fourth plant of ~0.75 million capacity, work for which could be
started by Q4FY12E. The royalty outgo has been higher at | 205 crore due
to the forex impact of | 27 crore due to ~10% rupee depreciation. One of
the concerns towards re-branding costs has been ~| 60crore, which has
been passed through and ~| 40 crore is expected to be spent in Q3 also.
V a l u a t i o n
We have been cautious on cost pressures emanating from re-branding
and R&D related expenses (quantum of which still remains a black box).
However, strong “Bharat” led rural demand is making other concerns fade
away a little. At the CMP of | 2067, it is trading at 15.6x FY13E EPS. We
are jittery and respectful of the “growth premium” being assigned by the
market in an uncertain global macro to HMCL. We have valued it at 14.5x
FY13E EPS to arrive at a target price of | 1919 with a HOLD rating
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
A “ h e r o ” i n p r o f i t , f o r v a l u a t i o n s o t h e r w i s e …
Hero MotoCorp Ltd (HMCL) reported Q2FY12 numbers, which were
above our estimates with net sales at | 5784.3 crore (I-direct estimate: |
5586.7 crore), a 28.2% YoY and 2.6% QoQ jump. The growth was volume
led (~20.1% YoY, 1.0% QoQ increase) at 1.54 million units with festive
demand leading the momentum. Realisations on a per unit basis jumped
1.8% QoQ at | 40,131 as ~1% price hike was incurred at the end of
Q1FY12. EBITDA margins reported were higher at 15.9% (up ~140 bps
QoQ) as the twin impact of lower RM/unit (1.4% QoQ) and favourable
realisations helped cumulatively. PAT came in stronger than estimates at
| 603.6 crore (up ~20% YoY) due to a strong operational performance.
Highlights of the quarter
HMCL has witnessed another robust quarter with volume growth at 20%
YoY (1.54 million units), 22% YTD (3.1 million units) and continues to
maintain motorcycle market share of ~56% in the domestic market. The
management remains confident of clocking sales of ~6.4 million units for
FY12 and HMCL is on course to touch 7.0 million unit capacity by March
2012. It had undertaken a price hike at the end of Q1FY12 of ~| 500-700
whose complete impact has become visible in Q2. HMCL has decided to
set up a fourth plant of ~0.75 million capacity, work for which could be
started by Q4FY12E. The royalty outgo has been higher at | 205 crore due
to the forex impact of | 27 crore due to ~10% rupee depreciation. One of
the concerns towards re-branding costs has been ~| 60crore, which has
been passed through and ~| 40 crore is expected to be spent in Q3 also.
V a l u a t i o n
We have been cautious on cost pressures emanating from re-branding
and R&D related expenses (quantum of which still remains a black box).
However, strong “Bharat” led rural demand is making other concerns fade
away a little. At the CMP of | 2067, it is trading at 15.6x FY13E EPS. We
are jittery and respectful of the “growth premium” being assigned by the
market in an uncertain global macro to HMCL. We have valued it at 14.5x
FY13E EPS to arrive at a target price of | 1919 with a HOLD rating
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