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In-line; Maintain Hold
Hero MotoCorp Limited’s (HMCL) 3QFY12 operating results were largely in line
with our estimates with EBITDA margins at 15.6% compared to our estimate of
15.7%. Revenue growth was higher by 1.4% compared to our estimate at Rs.60bn
on account of better-than-expected realizations (up 0.5% QoQ vs. est. drop of
0.8%), leading to in-line operating performance despite higher than expected
RMC and employee cost. Adjusted PAT stood at Rs.6.13bn (our est. Rs6.22bn).
Lower tax rate (15.3% vs. est. 16.7%) aided profitability. Management indicated
that volume growth would moderate to 10-11% in 4QFY12 and would be in
similar range for FY13E (in line with our estimate of 11% for FY13E). We continue
to maintain Hold rating on the stock with a target price of Rs.2,048 as the stock
offers limited upside from current levels.
Strong revenue growth led by volumes: Net sales increased 17% YoY to
Rs60.3bn (our estimate: Rs59.5bn), led by a growth of 11% in volume and 5% in
realization. On a sequential basis, sales were up 3.5%, led by growth in volume of
3% and realization of 0.5%. While we had assumed realization drop of 0.8% QoQ
due to unfavourable shift in product mix and lack of pricing action during the
quarter, actual realization stood higher at 0.5% QoQ.
…Margins in-line: Despite higher than expected RMC and employee cost,
better than expected revenue growth helped the company register in-line
operating performance (Ebitda margins at 15.6% vs. est. 15.7%). Adjusted PAT
stood at Rs.6.13bn (our est. Rs6.22bn).Lower tax rate (15.3% vs. est. 16.7%)
aided profitability.
Conference call highlights: 1.) 4QFY12 volume growth will moderate to 10-11%
and similar figures are expected for FY13E YoY. Rural demand (45% of sales) is set
to outpace Urban demand 2) Overall capacity will be 7mn units in FY12E. Haridwar
capacity will go up to 9,500 units/day from 8,500 units. Scooter segment capacity
will go up to 50k units/pm from c.30k 3) Pricing environment will remain stable
and 4) Targets 1mn units in exports over the next 4-5years.
Valuations and Recommendations: At the CMP of Rs.1,946, the stock is currently
trading at 15.9x FY12E EPS of Rs.122 and 13.6x FY13E EPS of Rs.143. We continue to
maintain Hold rating on the stock. Post the recent appreciation in the stock price,
the absolute upside looks limited from current levels.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
In-line; Maintain Hold
Hero MotoCorp Limited’s (HMCL) 3QFY12 operating results were largely in line
with our estimates with EBITDA margins at 15.6% compared to our estimate of
15.7%. Revenue growth was higher by 1.4% compared to our estimate at Rs.60bn
on account of better-than-expected realizations (up 0.5% QoQ vs. est. drop of
0.8%), leading to in-line operating performance despite higher than expected
RMC and employee cost. Adjusted PAT stood at Rs.6.13bn (our est. Rs6.22bn).
Lower tax rate (15.3% vs. est. 16.7%) aided profitability. Management indicated
that volume growth would moderate to 10-11% in 4QFY12 and would be in
similar range for FY13E (in line with our estimate of 11% for FY13E). We continue
to maintain Hold rating on the stock with a target price of Rs.2,048 as the stock
offers limited upside from current levels.
Strong revenue growth led by volumes: Net sales increased 17% YoY to
Rs60.3bn (our estimate: Rs59.5bn), led by a growth of 11% in volume and 5% in
realization. On a sequential basis, sales were up 3.5%, led by growth in volume of
3% and realization of 0.5%. While we had assumed realization drop of 0.8% QoQ
due to unfavourable shift in product mix and lack of pricing action during the
quarter, actual realization stood higher at 0.5% QoQ.
…Margins in-line: Despite higher than expected RMC and employee cost,
better than expected revenue growth helped the company register in-line
operating performance (Ebitda margins at 15.6% vs. est. 15.7%). Adjusted PAT
stood at Rs.6.13bn (our est. Rs6.22bn).Lower tax rate (15.3% vs. est. 16.7%)
aided profitability.
Conference call highlights: 1.) 4QFY12 volume growth will moderate to 10-11%
and similar figures are expected for FY13E YoY. Rural demand (45% of sales) is set
to outpace Urban demand 2) Overall capacity will be 7mn units in FY12E. Haridwar
capacity will go up to 9,500 units/day from 8,500 units. Scooter segment capacity
will go up to 50k units/pm from c.30k 3) Pricing environment will remain stable
and 4) Targets 1mn units in exports over the next 4-5years.
Valuations and Recommendations: At the CMP of Rs.1,946, the stock is currently
trading at 15.9x FY12E EPS of Rs.122 and 13.6x FY13E EPS of Rs.143. We continue to
maintain Hold rating on the stock. Post the recent appreciation in the stock price,
the absolute upside looks limited from current levels.
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