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India Equity Research Reports, IPO and Stock News
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Hero Motocorp reported a PAT of INR6.1bn (17.4%YoY, 1.6%QoQ growth),
in‐line with our estimates. Despite higher production from the tax free
Haridwar plant, EBITDA margins declined by 20bps sequentially to 15.6%
due to input cost pressures. The management has scheduled an earnings
concall on 20th January 2012 at 11:30 AM IST. Key things to watch out for
include the managements’ guidance on domestic sales volume which is
going through a soft patch and poses downside risks to our FY13 earnings.
We will revisit our financial forecasts post the concall.
Inline quarter, input cost pressure increases
PAT at INR6.1bn was in line with our estimates though 3% below consensus
expectations. The main deviation was driven by input cost pressure as seen by a 40bps
QoQ drop in gross margin to 27.1% in Q3FY12. This is despite higher production from
the tax free plant as is evident from lower tax rates at 15.3% vs 16.7% in Q2FY12. Other
highlights during the quarter were: (1) increase in staff costs, (2) and deterioration in
working capital (seen from lowering cash balances).
Focus shifts to sales growth as margin expansion becomes arduous
One of the major arguments of bulls for preferring Hero Motocorp has been the scope
of margin expansion. Q3FY12 numbers disappoint to that extent. With sales growth
slowing down and competition increasing, margin expansion is likely to be a difficult
task. Hence the focus is likely to shift to domestic sales growth and exports plans.
Outlook and valuations
Currently we have HOLD rating on the stock with a target price of INR2,130. We will
revisit our financial forecast post the earnings concall tomorrow
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hero Motocorp reported a PAT of INR6.1bn (17.4%YoY, 1.6%QoQ growth),
in‐line with our estimates. Despite higher production from the tax free
Haridwar plant, EBITDA margins declined by 20bps sequentially to 15.6%
due to input cost pressures. The management has scheduled an earnings
concall on 20th January 2012 at 11:30 AM IST. Key things to watch out for
include the managements’ guidance on domestic sales volume which is
going through a soft patch and poses downside risks to our FY13 earnings.
We will revisit our financial forecasts post the concall.
Inline quarter, input cost pressure increases
PAT at INR6.1bn was in line with our estimates though 3% below consensus
expectations. The main deviation was driven by input cost pressure as seen by a 40bps
QoQ drop in gross margin to 27.1% in Q3FY12. This is despite higher production from
the tax free plant as is evident from lower tax rates at 15.3% vs 16.7% in Q2FY12. Other
highlights during the quarter were: (1) increase in staff costs, (2) and deterioration in
working capital (seen from lowering cash balances).
Focus shifts to sales growth as margin expansion becomes arduous
One of the major arguments of bulls for preferring Hero Motocorp has been the scope
of margin expansion. Q3FY12 numbers disappoint to that extent. With sales growth
slowing down and competition increasing, margin expansion is likely to be a difficult
task. Hence the focus is likely to shift to domestic sales growth and exports plans.
Outlook and valuations
Currently we have HOLD rating on the stock with a target price of INR2,130. We will
revisit our financial forecast post the earnings concall tomorrow
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